South Korean tech giant blames weak demand for memory chips for sharp decline in profits.
Published On 6 Jan 2023
Samsung Electronics is expecting its worst fourth-quarter profit in eight years amid a sharp decline in global demand for memory chips and smartphones.
Profits are estimated to have plunged by 69 percent to 4.3 trillion won ($3.4 billion) during the October-December period, the South Korean tech giant said on Friday.
Weak demand for memory chips was “greater than expected as customers adjusted inventories… to further tighten finances spurred by concerns over deteriorating consumer sentiment caused [by] continued high global interest rates and weak economic outlooks,” Samsung said in a statement.
The preliminary results, which were well short of estimates, point to Samsung’s smallest quarterly profit since the third quarter of 2014.
The dismal profit estimate by the world’s largest memory chip, smartphone and TV maker – a bellwether for global consumer demand – sets a weak tone for other technology firms’ quarterly results.
“All of Samsung’s businesses had a hard time but chips and mobile especially,” said Lee Min-hee, an analyst at BNK Securities.
Rising global interest rates and cost of living have dampened demand for Samsung’s smartphones as well as the semiconductors it supplies to rivals such as Apple.
“Memory chip prices fell in the mid-20 percent during the quarter, and high-end phones such as foldable didn’t sell as well,” said Lee, adding that Samsung’s display business was hurt due to client Apple’s production delays at the world’s biggest iPhone factory in China during the quarter.
Three analysts said they expected Samsung’s profits to dive again in the current quarter, with a likely operating loss for the chips business as a glut drives a further drop in memory chip prices.
Samsung had said in October that it did not expect much change to its 2023 investments.
Samsung has a history of not announcing memory chip production cuts, according to analysts, but could organically adjust investment by delaying bringing in equipment or through other ways.