Samsung says fourth-quarter profits fell 69% to eight-year low amid weakening global economy

Samsung Electronics said on Friday its quarterly profit fell two-thirds to its lowest level in eight years as a weaker global economy drove down memory chip prices and dampened demand for electronic devices.

The dismal earnings estimate for the world’s biggest maker of memory chips, smartphones and TVs – an indicator of global consumer demand – sets a dim tone for quarterly results from other tech companies.

Samsung’s profits are expected to decline further in the current quarter, analysts said, after the South Korean company said its October-December operating profit was likely to have fallen 69% to 4.3 trillion. of KRW (about Rs. 27,980 crore) against KRW 13.87 trillion (about Rs. 90,190). one year earlier.

It was Samsung’s smallest quarterly profit since the third quarter of 2014 and was lower than KRW 5.9 trillion (about Rs 38,370 crore) Refinitiv SmartEstimate, which is weighted by analyst forecasts which are more consistently accurate.

“All of Samsung’s businesses have had tough times, but especially chip and mobile,” said Lee Min-hee, an analyst at BNK Investment & Securities.

Quarterly revenue likely fell 9% from the same period a year earlier to $70 trillion, Samsung said in a brief preliminary earnings statement. Asia’s fourth-largest listed company by market value will release its detailed results on January 31.

Rising global interest rates and the cost of living have dampened demand for smartphones and other devices made by Samsung, as well as for the semiconductors it supplies to competitors such as Apple.

“For the memory business, the decline in demand in the fourth quarter was greater than expected as customers adjusted inventory in an effort to further tighten finances…” Samsung said in the statement.

Earnings from its mobile business declined in the fourth quarter as smartphone sales and revenue declined due to weak demand stemming from protracted macroeconomic issues, Samsung added.

“Memory chip prices fell about 20% in the quarter, and high-end phones such as foldables didn’t sell as well,” BNK Investment’s Lee said, adding that his display had been affected due to production delays by customer Apple at the world’s largest iPhone factory in China during the quarter.

Three analysts said they expect Samsung’s profits to plunge again in the current quarter, with an operating loss likely for the chip sector, as a glut leads to another drop in chip prices. memory chips.

Shares of Samsung closed 1.4% higher on Friday, against a 1.1% rise in the broader market. Shares of rival memory chip maker SK Hynix rose 2.1%.

“The reason stocks are rising despite the weak earnings result is that…investors are hoping that Samsung will have to cut production, as Micron or SK Hynix have announced, which would help the memory industry in its together,” said analyst Eo Kyu-jin. at DB Financial Investments.

Samsung had said in October that it did not expect much change in its 2023 investments. Analysts said Samsung has a history of not announcing memory chip production cuts, but may adjust organically investments by delaying the arrival of equipment or by other means.

© Thomson Reuters 2023

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