Semi Stocks Slip on Samsung's Warning of Softer Chip Demand

Samsung (OTC: SSNLF) issued a warning that it expects to witness weaker chip demand from smartphone and PC makers amid mounting fears of a recession.

Although the electronics giant sees a more resilient demand from server clients, it also warned that this business segment is not immune to macro headwinds.

Samsung reported its revenue soared 21% to 77.2 trillion won. The company also reported a Q2 operating profit of 14.1 trillion won ($10.8 billion) to beat the 14 trillion won estimate. This also marked the highest second-quarter profit in 4 four years.

The vast majority of the profit, over 70%, came from the chip segment while the mobile business contributed with profits of 2.62 trillion won. Samsung also said it benefited from a strong dollar.

"Fundamental demand for server (memory chips) will stay solid as the investments in core infrastructure and new growth areas such as AI and 5G are expected to keep expanding, centering on major data centre companies," Samsung said.

The company added that its mobile business witnessed lower profits due to the Russia/Ukraine conflict, inflation concerns, and higher costs.

"Server (chip demand) is less affected by macro issues... But if global recession occurs, server clients will also have to adjust their inventory," Jin-man Han, executive vice president at Samsung's memory chip business, said on an earnings call.

"Due to high uncertainty, we are updating our forecast constantly," he added, according to Reuters.

Shares of U.S. semi stocks are down this morning on Samsung’s warning. AMD (NASDAQ: AMD) and Nvidia (NASDAQ: NVDA) are down 1.3% and 1.1%, respectively, while Micron Technology (NASDAQ: MU) is down 1.4%.

By Senad Karaahmetovic

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