Samsung suffered a 95% drop in profit in Q2 2023

It has been a terrible first half of 2023 for Samsung, at least financially. Declining prices of memory chips have hit its earnings hard. The Korean firm’s operating profit dropped to a 14-year low in the first quarter of the year. The Q2 2023 profit didn’t see any significant uptick.

According to Samsung’s latest quarterly earnings report, it made KRW 60.01 trillion (approx. $48.8 billion) in consolidated revenue in the second quarter of the year. That’s a relatively healthy figure and just a six% drop from the KRW 63.75 trillion it generated in the previous quarter.

Even when we compare it with Samsung’s revenue for the same period last year (April to June 2022) when the company’s earnings were on the other end of the spectrum, it isn’t a massive drop. The Korean behemoth made KRW 77.2 trillion in Q2 2022, which means a 22% decline this year.

However, Samsung has struggled to convert its revenue to profit at a healthy rate. Its operating profit for Q2 2023 was just KRW 670 billion (approx. $522 million). That’s a profit margin of just 1.1%. More importantly, Samsung’s Q2 profit has dropped a staggering 95% annually from 2022. It took home KRW 14.1 trillion last time around.

The operating profit of KRW 670 billion this past quarter may be slightly better than what Samsung made in the first quarter (KRW 640 billion), but it’s far, far off from what the company usually makes. A 95% drop in quarterly profit in just a year is worryingly bad for a conglomerate as big as Samsung. And the company itself is to blame here, at least in some part.

Over-reliance on the memory chip business hit Samsung in Q2 2023

For years, the semiconductor division has been Samsung’s cash cow. To put that into perspective, almost 60% of the company’s total Q1 2022 profit (KRW 8.4 trillion out of KRW 14.12 trillion) came from semiconductors. Unfortunately, the chip industry has been suffering from huge price drops lately, and the Korean biggie is feeling the heat.

Samsung’s chip division posted a consolidated revenue of KRW 14.73 trillion in Q2 2023, but it still ended up losing KRW 4.36 trillion from this business unit. On the bright side, the Korean firm sees the market gradually moving toward stability in the second half of the year. It remains to be seen if the company’s semiconductor division will return to profitability in the third quarter.

Nonetheless, Samsung needs to find ways to improve its earnings from other business divisions. Despite being the world’s largest smartphone company, stiff competition in the Android space never allowed it to keep big margins. It earned KRW 3.04 trillion (approx. $2.4 billion) from mobile and network businesses in Q2 2023. Time will tell whether the newly launched Galaxy Z Fold 5 and Galaxy Z Flip 5 foldables help Samsung improve that figure in the third quarter.