The sale of smartphones and other consumer electronics also fell at Samsung due to inflation. But the high prices for semiconductors boost the group result.
(Foto: Bloomberg)
Seoul Samsung remains on course for growth thanks to its strong semiconductor business. In the second quarter, revenue was 77.2 trillion won ($59.2 billion), up 21 percent year-on-year, while profit rose 12 percent to 14.1 trillion won ($10.8 billion). This was the second-best quarterly result in the company’s history.
The chip business achieved a record result for the second quarter in a row, Samsung explained. It now accounts for 37 percent of sales and 71 percent of operating profit. Samsung makes significantly less money with other products such as smartphones, televisions and household appliances.
With this, Samsung underscores once again that the group, like the other semiconductor manufacturers, is one of the winners of the global chip crisis. Companies around the world are suffering from delivery bottlenecks for the control centers of digital products. The high demand drives up the prices for chips – and thus the profits of the manufacturers.
The chip manufacturer Qualcomm reported on Wednesday with 10.9 billion dollars in sales in the past quarter, 36 percent more than a year earlier. Taiwan’s contract manufacturer TSMC even increased sales by 44 percent to $17.9 billion and net income by 76 percent to $8 billion.
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Not even the slower sales of smartphones and other consumer electronics triggered by high inflation can slow manufacturers down, Samsung made clear. The business with memory chips for mobile devices and computers, where the Koreans are world market leaders, was lower than expected, said Han Jin Man, a vice president of the group, in the investor call.
However, the weakness was partially offset by solid demand for data servers. Because the server market is less affected by geopolitical crises such as the Ukraine war, Han explained. “Because they are considered essential infrastructure.” Investments in artificial intelligence applications and hybrid servers that combine on-premises and cloud storage are also growing.
Betting on small nanometer chips
Samsung’s bet on the future is also growing: the foundry business. This is contract manufacturing of semiconductors for other companies. Samsung is trying to snatch market share from the world market leader TSMC in the growing segment.
The Korean challenger now wants to grow faster than the market. To do this, he tries to present himself as a technology leader. Samsung claims to have shipped the world’s first chips with three nanometer structures in June. The smaller the structures, the less energy the chips consume with higher computing power. As a result, chip makers are fiercely competing to produce smaller and more compact chips.
Samsung’s investments show how great the financial expense – and thus the risk – is. Samsung invested $9.4 billion in the past quarter. The chip division accounted for 90 percent. In this business, too, the uncertainty is high due to the Ukraine war, the corona pandemic, high inflation, fears of recession and delivery problems.
Samsung is also affected. The company holds a larger inventory of chips than it used to in order to be able to absorb minor disruptions in the supply chain. And management doesn’t want to commit to when the situation will improve. Due to the high level of uncertainty, the group management even refrained from making a balance sheet forecast. Internally, some of the forecasts are currently being readjusted on a daily basis, said a manager.
In this situation, Samsung is focusing on premium products across all segments. When it comes to sensors, the Koreans are trying to catch up with world market leader Sony with a super-high-resolution 200-megapixel image sensor.
With smartphones, the group wants to grow in the second half of the year in a weakly growing market with new foldable models. In this area, Samsung enjoys a major advantage over its American arch-rival Apple in the premium segment: the cult brand from California does not yet offer a folding cell phone.
More: Two-year delivery period: Lockdowns in China are driving chip customers to despair