Samsung Electronics on Thursday last week reported just enough earnings data to tease us about what might be heading our way. Second-quarter revenue and operating profit at the South Korean Goliath portend a tough second half for global technology hardware manufacturers.
Sales pipped estimates by a little, but that was mostly because analysts have been cutting their forecasts over the past two weeks in anticipation of a worsening market for Samsung’s chips, smartphones and other electronic devices.
The figure was likely boosted by a slide in the Korean won of almost 7 percent during the period. Crucially, operating profit missed by a wider margin than revenue beat. Samsung only provided a preliminary range for the data, and this analysis is based on the median of that information. A full breakdown of numbers by division is to come later this month.
What we do know so far, though, is that prices of its bread-and-butter products are weakening.
Although Samsung is best known for smartphones and recently grabbed headlines for claiming to be first to make semiconductors at the advanced 3-nanometer node (an announcement that was mostly a marketing ploy), a large swathe of its revenue and a bulk of its profit comes from making memory chips, notably DRAM which helps speed up a computer and Flash which stores data.
Because these components, which are used in most electronic devices, are a commodity product, any slowdown tends to impact both shipments and prices. There are already signs manufacturers are willing to sell for less just to move stock.
“Facing uncertain peak-season demand in 2H22, some DRAM suppliers have begun effectively expressing clear intentions to cut prices,” Taipei-based researcher TrendForce wrote this week. “This situation will cause 3Q22 DRAM pricing to drop from the previous 3% to 8% to nearly 10% quarter on quarter.”
Slowdowns in commodity products tend to have a multiplier effect. A 10 percent drop in prices coupled with a 10 percent fall in demand means a 19 percent drop in revenue (0.9 times 0.9 is 0.81). A 15 percent decline in both equates to a 44 percent hit on sales.
This means the bottom could fall out of the memorychip market very quickly.
Samsung’s announcement “may push analysts to cut forecasts for the firm’s 2022 operating profit by 4% to 6%,” Bloomberg Intelligence analyst Masahiro Wakasugi wrote after the announcement. “Its 3Q sequential profit growth may not be as strong as expected, due to weaker PC and smartphone demand caused by inflation.”
US rival Micron Technology sounded an early warning last week. While the world’s third-largest maker of DRAM posted revenue and operating profit for the quarter ended June 2 that was largely in line with estimates, its forecast for the coming three months was 20 percent lower than expectations. It now sees the PC and smartphone markets much weaker than previously thought.
Taiwan Semiconductor Manufacturing Co, which does not make many memory chips, but is the major player in processors that run smartphones, computers and servers, is also seeing signs of a slowdown amid reports that key clients have asked to cut or delay orders.
It was barely six months ago that the technology hardware sector looked quite immune to a global slowdown as streaming services and cloud computing continued to drive demand for chips and servers, while consumers remained eager to buy the latest gadgets. That picture is now fading fast and investors need to brace for more tough news to come.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Congratulations to China’s working class — they have officially entered the “Livestock Feed 2.0” era. While others are still researching how to achieve healthy and balanced diets, China has already evolved to the point where it does not matter whether you are actually eating food, as long as you can swallow it. There is no need for cooking, chewing or making decisions — just tear open a package, add some hot water and in a short three minutes you have something that can keep you alive for at least another six hours. This is not science fiction — it is reality.
Kinmen County’s political geography is provocative in and of itself. A pair of islets running up abreast the Chinese mainland, just 20 minutes by ferry from the Chinese city of Xiamen, Kinmen remains under the Taiwanese government’s control, after China’s failed invasion attempt in 1949. The provocative nature of Kinmen’s existence, along with the Matsu Islands off the coast of China’s Fuzhou City, has led to no shortage of outrageous takes and analyses in foreign media either fearmongering of a Chinese invasion or using these accidents of history to somehow understand Taiwan. Every few months a foreign reporter goes to
The war between Israel and Iran offers far-reaching strategic lessons, not only for the Middle East, but also for East Asia, particularly Taiwan. As tensions rise across both regions, the behavior of global powers, especially the US under the US President Donald Trump, signals how alliances, deterrence and rapid military mobilization could shape the outcomes of future conflicts. For Taiwan, facing increasing pressure and aggression from China, these lessons are both urgent and actionable. One of the most notable features of the Israel-Iran war was the prompt and decisive intervention of the US. Although the Trump administration is often portrayed as
Czech military intelligence last week revealed that Chinese diplomats and intelligence officers followed Vice President Hsiao Bi-khim (蕭美琴) and allegedly planned to stage an incident during her visit to Prague last year. In March last year, Czech media reported that a Chinese diplomat ran a red light while tailing Hsiao’s car. A Czech public radio news Web site reported on Thursday that Chinese officials also had plans to stage a car crash, a claim later confirmed by Czech military intelligence. The radio report cited a Czech Military Intelligence spokesperson who described the incident as “a case of physically following, to the point
RSS