Despite Lower Smartphone Demand, Samsung Managed Impressive Numbers During the Second Quarter

While business has been slow for many, Samsung Electronics managed to crunch in better numbers from its April-June profit – a feat last seen in 2018.

Despite the inflation, the company generated strong sales thanks to memory chips for server customers. As a result, shares of the memory-chip and smartphone makers rose 2.5% after preliminary results for the second quarter were announced against a 1.5% rise on the broader market.

Samsung posted an operating profit of 14 trillion won or $10.7 billion, an 11% increase from last year’s profits. Revenue also rose 21%, in line with estimates.

The company managed a strong quarter amid a struggling time for chipmakers who warned about a looming chip glut at customers who stocked up during the pandemic to meet the higher demand from people working from home.

Chipmakers like Micron and Advanced Micro Devices have signaled waning demand as inflation squeezes spending.

“Memory chipmakers are expected to build inventory and hike shipments when prices rebound, and demand recovers next year,” said Cape Investment analyst Park Sung-Soon.

Data provider TrendForce reports that prices of specific DRAM chips fell by about 12% last month, while prices of NAND Flash chips are projected to fall 5% in July-September from last quarter.

The sales made server chip demands mark the highlight for Samsung’s operations as inflation, the possibility of a downturn in major markets, the Russian invasion, and China’s COVID-19 lockdowns have held back Samsung phone sales.

Read also: South Korean Tech Giant Samsung Holds 50 Million Unsold Units

Tech companies like Amazon, Alphabet’s Google, Meta, and Microsoft have played an integral role in Samsung’s profits, buying chips to meet cloud demand.

On the opposite end of the table, Taiwanese contract electronics supplier and Apple iPhone maker Foxconn recently raised its full-year outlook and expressed optimism for the third quarter.

The US dollar’s value also hit a 20-year high, helping Samsung’s chip profits in the second quarter. The chip sales are mainly made in dollars, which, when converted, contribute to the Korean headquarters’ numbers.

Smartphone shipments in the second quarter were estimated to be between 62 to 64 million, 5 to 8% lower than estimation in March. In the first quarter, Samsung shipped 74 million smartphones. The lower smartphone demand can be attributed to inflation.

“This trend is the same for major global smartphone makers, although there is variance to some degree,” said Jene Park, Senior analyst at Counterpoint. “In particular, the hit to the demand for low- and mid-end smartphones seems more severe.”

Read also: Samsung to invest $350 billion, plans to hire 80,000 workers

iPhone Suppliers Fuel Rumors of Price Increase for iPhone 14 Lineup

Tech enthusiasts and Apple loyalists are anticipating the arrival of the iPhone 14 lineup this year, but rumors have circulated that the phones’ prices will increase. Although nothing is set in stone, people will have to wait until mid-September to learn if the rumors are accurate. 

Many speculate that drastic cost increases stem from Apple’s parts suppliers, and the sentiments of the increase only grew when companies in the iPhone supply chain indirectly confirmed the company would pass some of the rising costs of manufacturing iPhones this year.

Japanese company Showa Denko K.K. is known for supplying the chip fabrications to chipmaker TSMC, which manufactures the A-series and M-series custom chips in Apple devices.

The company is responsible for the A15 chips in the iPhone 13 models and will manufacture the A16 chips in the upcoming lineup. 

However, reports say that Showa Denko was forced to raise costs several times due to COVID-19 lockdowns, wars, and the declining value of the yen.

Chief Financial Officer Hideki Somemiya told Bloomberg that the company had no choice but to increase the cost it passes on to customers.

“A big theme this year common to all the players in the materials industry is how much cost burden we’d be able to convince customers to share with us,” he explained.

“The current market moves require us to ask twice the amount we had previously calculated.”

With TSMC passing the cost increases to Apple, the iPhone 14 prices could be raised.

Read also: Apple’s ‘California Streaming’ Sets the Stage for this Year’s Lineup of New Releases

iPhone 14 prices

Reports say that Apple will make two different moves to raise the cost of the iPhone 14 series.

Since last year, rumors have circulated that the iPhone mini lineup will be discontinued after the 13, replacing it with the 6.7-inch iPhone 14 Plus/Max – the device is rumored to be priced around $899.

The regular iPhone 14 will likely retain its $799 price.

Meanwhile, the Pro models will see an increase with a starting price of $1,099. The cheapest iPhone 14 Pro Max is also rumored to be $1,199.

Years earlier, Apple and wireless carrier partners used a pricing strategy for the base models wherein buyers could get a $30 discount at checkout by taking carrier deals. However, the actual sticker prices of the iPhone 13 and 13 mini are $729 and $829, respectively.

Provided the company still uses the cost-saving strategy for the upcoming iPhone 14, the cheapest models could start at $829 and $929.

Read also: EU will support law adopting only USB-C ports for devices, a blow for Apple