After a persistent excess resulted in sustained losses in the technology giant’s core business in the June quarter, despite a reduction in production, Samsung Electronics signalled on Thursday a modest worldwide chip demand recovery.

“Looking to the second half of the year, the (memory chip) market is expected to gradually move toward stability considering increasing production cuts in the industry,” the world’s biggest memory chip and smartphone maker said in a statement.

The South Korean company stated that chip customers are anticipated to go from using up inventories to purchasing semiconductors once more, a day after rival SK Hynix likewise predicted a fledgling market rebound on strong artificial intelligence demand.

As a result of reduced demand for items ranging from consumer electronics to servers that rely on semiconductors, Samsung announced a 95% drop in earnings for the June quarter.

In April through June, operating profit dropped from 14.1 trillion won to 669 billion won ($527 million).

That was the second-lowest quarterly profit in 14 years and roughly matched the company’s expectation of 600 billion won this month.

The revenues of the company dropped by 22% to 60 trillion won.

A 4.36 trillion won loss was announced by its chip division during the quarter, continuing a trend for what is often Samsung’s main source of income. A year prior, it had announced a profit of 9.98 trillion won.

Due to strong demand for memory chips from AI, which resulted in higher-than-expected shipments of DRAM chips, which store data from applications while the system is in operation, chip losses decreased marginally from the first quarter’s 4.58 trillion won.

Due to uncertainty in short-term demand, Samsung’s semiconductor contract manufacturing business suffered worse, reporting a “significant” profit decline in the June quarter.

As it confronts sluggish worldwide demand, Taiwan’s TSMC, the largest contract chipmaker in the world, cut its yearly sales projection this month and warned of cost concerns.

After the chip division losses exceeded market expectations, Samsung shares fell 0.7% in early trade, compared to a 0.6% rise in the overall market.

According to the business, capital expenditures totaled 14.5 trillion won during the second quarter, of which 13.5 trillion won was spent on chips.

According to CEO Kyung Kye-hyun, it will start shipping advanced 4-nanometer chips from its Taylor, Texas manufacturing in late 2024. It is also increasing production in Pyeongtaek, South Korea.

In the June quarter, Samsung’s mobile division recorded a 3.04 trillion won profit, up from 2.62 trillion won a year earlier. In particular at the high end, it predicted that the entire smartphone industry would resume yearly growth in the second half.

(Adapted from USNews.com)