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Samsung boosts operating profit to highest since 2018

The company's performance was boosted by strong sales of memory chips for servers, while demand from mobile phone manufacturers was weaker.

South Korea’s Samsung Electronics increased operating profit by 11% to 14 trillion won ($10.7 billion) in the second quarter, its best result for the period since 2018, according to preliminary data.

This positive news comes at a time when talk of global recession and supply chain problems is everywhere. Chips are in short supply in general and this is starting to affect a lot of companies around the world. Recently, for example, major chip problems were announced by automaker Generals Motors.

Other chip makers such as Micron and Advanced Micro Devices (AMD) have warned of the threat of chip shortages going forward. At the same time, however, they have suggested that overall demand for chips is weakening, or that high inflation is reducing consumer spending and consumers are therefore not buying as much.

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This is confirmed by figures from the National Bureau of Statistics, which show an increase of more than 50% in South Korea’s chip stock in May.

Analysts have also warned of falling semiconductor prices. Prices of DRAM chips, which are used in devices and servers, fell about 12% year-on-year in June, according to analyst firm TrendForce. Prices of NAND flash chips for data storage are estimated to fall 5% in the third quarter compared with the previous quarter, Reuters reported.

The world situation reduces sales but boosts revenue

Rising inflation, fears of a downturn in major markets, the war in Ukraine, and coronavirus restrictions in China have caused smartphone sales to slow. Thus, the only bright spot is the demand for server chips, according to analysts. Samsung was helped in the quarter by the fact that big U.S. technology firms such as Amazon, Microsoft, Google, and Meta Platforms, which use data center services a lot, continued to buy chips to meet cloud demand.

Read also: SAS files for bankruptcy protection in the US

On the other hand, the strong dollar provided further support to Samsung as the company sells chips mostly in dollars while reporting profits in Korean won. The stronger US currency thus boosts chip sales revenue when converted.

Bruno is an Investment enthusiast with several years of experience in the industry. He enjoys following the latest news and technology trends...

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