Samsung Elec posts higher Q2 profit on strong server-chip demand

Samsung Electronics Co Ltd turned in its best April-June profit since 2018 with an 11% year-on-year rise, as lingering demand for its memory chips from server customers offset lower sales to inflation-hit smartphone makers.

The world`s largest memory-chip and smartphone maker said on Thursday its second-quarter operating profit rose to 14 trillion won ($10.73 billion) from 12.57 trillion won a year earlier.

That was only slightly shy of a 14.45 trillion won SmartEstimate from Refinitiv.

Revenue likely rose 21% from the same period a year earlier to 77 trillion won, Samsung said in a short preliminary earnings release, in line with market expectations.

Samsung is due to release detailed earnings this month.

Samsung`s chip profits were shielded last quarter from what analysts think is a looming glut at customers after high demand in the past two years, as large U.S. tech firms that use a lot of data centre services kept buying chips to meet cloud demand.

But prices of specific DRAM chips, used in tech devices and servers, fell about 12% last month from a year ago, according to data provider TrendForce, and analysts expect prices to continue to fall as demand weakens for smartphones and laptops.

"Server DRAM has become the only effective sales outlet ... Therefore, Korean manufacturers were the first to signal a willingness to discuss a quarterly pricing reduction of more than 5% (for server DRAMS)," TrendForce said.

Prices of NAND Flash chips, used for data storage in tech devices, are also projected to fall as much as 5% in the July-September period from the previous quarter, TrendForce said.

Chipmakers worldwide are facing cooling demand after two bumper pandemic years, when people bought devices to work remotely.

Rising inflation, concerns about a downturn in major markets, the war in Ukraine and China`s COVID-19 lockdowns have resulted in slowing smartphone sales, leaving server chip demand as the only bright spot, analysts said.

Samsung shares rose 0.9% in morning trade.