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Samsung’s profit surges 12% in Q2 on server demand, premium phone sales

A pedestrial walks past an advertisement of Samsung Electronics' flagship S22 series phones in Seocho-gu, Seoul, Thursday. (Yonhap)
A pedestrial walks past an advertisement of Samsung Electronics' flagship S22 series phones in Seocho-gu, Seoul, Thursday. (Yonhap)
Samsung Electronics logged an operating profit of 14.1 trillion won ($10.77 billion) during the second quarter, up 12.2 percent from the previous year despite rising material prices and recession fears that are weakening consumer demands, the company said Thursday.

The South Korean tech giant’s quarterly revenue from April to June came to 77.2 trillion won, up 21.3 percent from a year prior, slightly beating the market consensus of 77 trillion won.

The quarterly sales figure was the second-largest in history, trailing that of the previous quarter, according to chips-to-consumer electronics company.

By division, revenues for Samsung’s semiconductor chip division saw a 24 percent rise on-year and set a historic high in revenue for two consecutive quarters. Samsung’s mobile division also spearheaded the uptrend, enjoying a 30 percent increase in sales.

Samsung said the result was attributable to robust demand for memory chips used in servers, as well as sales of its premium smartphones under the Galaxy S22 lineup, dwarfing impacts of macroeconomic issues such as inflation that led to the shrinking sales.

Server chip demand is likely to remain solid through the end of this year, irrespective of weak consumer sentiment, said Han Jin-man, executive vice president of Samsung’s semiconductor business, in a conference call.

According to Han, macroeconomic issues have instead been affecting shipments of consumer-oriented memory chips for personal computers and mobile phones such as DRAM and NAND.

“Server demand and macro issues show relatively weak correlation,” said Han, who represents memory chip operations in Samsung.

“Centering on major data center companies, investment in core infrastructure and new growth areas such as AI and 5G are expected to keep expanding, and fundamental demand should stay solid.”

He added, however, that customers’ inventory adjustment affected by overall integrated chip parts supply shortages might be a cause for concern -- even for server demand during the second half.

As for mobile phones, Samsung’s flagship S22 smartphones, including the highest-end S22 Ultra, saw a sequential increase as the supply disruption in the first quarter resolved, said Kim Sung-koo, vice president of Samsung’s mobile division.

Kim added that the profitability of the mobile phone business decreased due to increased cost of materials, components and logistics, as well as headwinds from the weak local currency against the dollar.

Moreover, the logic chip business under Samsung’s System LSI business division saw its earnings improve on the back of the growing supply of major components such as display driver integrated circuits and system-on-chips. Samsung’s System LSI division also started supplying the world’s first 200-mega pixel sensors.

Pyee Jae-geol, who leads Samsung‘s logic chip business, said Samsung is in the process of revising its system-on-chips business model represented by its flagship Exynos chips, with a focus on gaining mid- to long-term competitiveness. Pyee denied rumors that the company plans to put an end to Exynos chips.

The contract-based chip manufacturing firm -- which earlier in July shipped the world’s most advanced 3-nanometer chips -- was buoyed by demand for advanced processes, especially for high-performance computing applications, as well as overall yield improvement, according to Samsung.

Samsung Electronics’ share price edged up 0.5 percent from the previous day‘s closing price as of 2 p.m.

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