Samsung's chip business to remain in red in Q2 amid weak chip demand

SK hynix and the chip division of Samsung Electronics are expected to post quarterly losses in the second quarter after reporting losses in the previous three months as the chip downturn drags on, market data showed on Sunday.

Samsung's Device Solutions (DS) unit in charge of chip business is forecast to log an operating loss of between 3 to 4 trillion won, although that would mark a decline from the 4.58 trillion won operating loss in the first quarter.

The dismal earnings outlook came as the slump in the global chip industry is continuing, as people and companies reduce spending on tech products amid the runaway inflation.

Samsung, the world's largest memory chip and smartphone maker, reported the worst quarterly profit in 14 years in the first quarter. Weeks before releasing the earnings, Samsung said it was cutting production to cope with the memory chip glut.

SK hynix is expected to post a third consecutive quarterly operating loss of 2.86 trillion won in the second quarter, after the 1.89 trillion-won loss in the fourth quarter of 2022 and the operating loss of 3.4 trillion won in the previous quarter.

Analysts said the chip market will improve later this year as the impact from the cut in the chip output will kick in and the global demand will pick up.

"We believe that Samsung's quarterly earnings bottomed out in the first quarter. The second-quarter DRAM output beat the forecast and the inventory levels began to decline," Kim Dong-won, an analyst at KB Securities, said.

SK hynix will also see "the average selling prices in DRAM and NAND pick up, which will contribute to slashing the losses in the third quarter," said Doh Hyun-woo, an analyst at NH Investment & Securities.