Samsung could post its worst profit in decades as the great chip shortage turns into a glut
Overflowing chip bowl… not talking Doritos. Stale chip demand could take a big bite out of Samsung's earnings this week. The South Korean tech titan is the world’s largest producer of memory chips, which are used in everything from smartphones to computers to servers. Memory-chip prices dropped 20% last quarter as companies like Samsung slashed prices to cope with an industry-wide glut. Now the flip-phone icon expects its worst quarterly profit since 2009.
Short circuit: Earlier this month, Samsung said it would begin a “meaningful” chip-production cut, following similar moves by rivals like Micron and Western Digital.
Unchipper: Semiconductor giants have been losing money on every chip they churn out. Samsung's chip unit is forecast to post a record $1.6B loss on Thursday.
Boom and bust… Tech gadgets were hot commodities midpandemic as homebound consumers splurged on new PCs, TVs, and phones. But demand for $1K flat screens has cooled, hurting chipmakers (which boosted production to ease “the great chip shortage”). Now they’ve got too many chips. The industry is notoriously cyclical, but the latest oversupply is historic.
Not all chips are created equal… It depends on what’s in demand. While appetite for personal devices like PCs and phones has cooled, demand for AI-powering tech is heating up. Chipmakers like Intel and Nvidia are going all in on AI, and the AI hardware market could hit $90B by 2030 (up 8X from 2021). Nvidia shares have surged on hunger for its AI chips, which are selling for up to 20X more than its gaming processors.