Weaker Phone and Computer Chip Demand Forecasted by Samsung as Recession Concerns Continue
A recent warning from Samsung Electronics claims that there is an upcoming decline in smartphone and PC chip demand due to the global weakening of retail shopping trends. Also, the demand for server chips, which is traditionally more resilient, may also go down, due to the expected recession.
Qualcomm, another industry giant from San-Diego, also predicts a drop in Q4 sales, since the smartphone demand is already weakening, and server chips may be next due to the inflation’s negative impact on consumer spending. Further, the war in Ukraine and China’s coronavirus lockdowns have forced phone manufacturers to cut down on their chip orders because of the related logistics problems.
Samsung plans to manage the impending problems by implementing flexible capital expenditures in the short term, and will vary the chip supply according to needs. The company was moderately optimistic about the smartphone demand in the latter half of 2022, claiming that there are no longer significant logistics disruptions. Samsung anticipates the demand to remain the same or rise slightly. The latest foldable models, to be revealed later on this year, are slated to exceed the sales figures of the company’s previous flagship model – Galaxy Note.
Largest Q2 profits in the last 3 years
Samsung's operating profit rose to $10.8 billion for Q2 2022 from $9.6 billion for the same period in 2021. Last quarter was the most successful since 2018, and exceeded its own estimates. Chip-related profits accounted for approximately 80%, and mobile-device-related profits – for 20% of the total.
The AI and 5G sectors, as well as core infrastructure investments, are expected to continue their growth and fuel a solid fundamental demand for chips.
Other industry players, on the other hand, claim that the server memory chip demand may decline in the near future, as there is sufficient inventory still to be used up.
Samsung's Q2 revenue is up 21% to $59.2, which is also boosted by a strong dollar.