Samsung Electronics reported on Tuesday that the sluggish global economy has reduced demand for its consumer electronics items and computer memory chips, which caused its profit for the most recent quarter to drop by almost 70%. The business’ operating profit for the three months ending in December, which was 4.3 trillion won ($3.5 billion), was down 69% from the same period a year earlier and was the lowest quarterly profit since the third quarter of 2014. To 70.46 trillion won ($57.2 billion), revenue dropped 8%.
Due to its dual strengths in parts and completed goods, the South Korean tech behemoth prospered throughout the first two years of the pandemic. It benefited from strong demand for PCs, TVs, and the processors that powered computer servers while the virus compelled millions of people to work from home.
The economic shock brought on by Russia’s war in Ukraine, which disrupted industrial supply lines and left major economies struggling with higher inflation and weaker GDP, has been more difficult for the corporation to handle. According to a statement from Samsung, “the business environment drastically deteriorated in the fourth quarter due to sluggish demand amid a global economic slowdown.”
The company’s profit from its core semiconductor business for the most recent quarter was 270 billion won ($219 million), a considerable decrease from the 8.83 trillion won ($7.1 billion) it earned a year earlier.
As customers reduced their inventory due to “deepening concerns” in the global economy, semiconductor prices dropped dramatically, according to Samsung, which the company predicts will continue into the first quarter of 2023.
In light of the worldwide economic slump, Samsung also anticipates a further fall in demand for its smartphones and televisions in the first quarter.
According to some estimates, the semiconductor industry will report a loss in the first quarter, bringing the overall profit down from the fourth. The personal computer market is experiencing a chip oversupply, and chipmaker Intel Corp. stated last week that it anticipates losing money in the current quarter.
Rival manufacturers of memory chips Micron Technology Inc. and SK Hynix Inc. already announced they would reduce spending in 2023.
Investors will be waiting to see if Samsung, in keeping with its customary attitude, avoids discussing a direct chip production decrease or, given the severity of the memory chip down-cycle, makes a clear indication of production cuts.
Later this week, Samsung intends to introduce its newest Galaxy S flagship models.
Compared to a 0.2% decline in the overall market, Samsung’s stock slid 2.1% in the morning session. ($1 = 1,232.6000 won)