Samsung sees quarterly profit drop to 8-year low

Samsung Electronics on Friday forecast a two-thirds drop in its quarterly profit to an eight-year low, as a weakening global economy hit memory chip prices and limited demand for electronic devices. .

The dismal profit estimate for the world’s biggest maker of memory chips, smartphones and TVs puts a weakness bias on the quarterly results of other technology companies.

The South Korean company said its October-December operating profit was expected to drop 69% to 4.3 trillion won ($3.37 billion), from 13.87 trillion won in the same period a year ago, according to communicated with preliminary results. The most detailed balance sheet will be published on January 31st.

If confirmed, it will be Samsung’s lowest quarterly profit since the third quarter of 2014, and short of the result of 5.9 trillion won expected by analysts, according to research by Refinitiv SmartEstimate.

“All of Samsung’s businesses struggled, but especially chips and phones,” said Lee Min-hee, an analyst at BNK Investment & Securities.

The company’s quarterly revenue is expected to drop 9% from the same period in 2021 to 70 trillion won, Samsung said.

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

“For the memory (chip) business, the decline in demand in the fourth quarter was larger than expected as customers adjusted inventories in their effort to further tighten bills…” Samsung said in a statement.

Profit at its mobile business declined in the fourth quarter as smartphone sales and revenues slowed due to weak demand resulting from prolonged macroeconomic woes, Samsung added.

Three analysts said they expected Samsung’s profit to fall further in the current quarter, with an operating loss likely for the semiconductor business as oversupply drives a further drop in memory chip prices.

Shares of Samsung closed up 1.4% on Friday, against a 1.1% advance in the broader index of the Seoul Stock Exchange. Shares in rival memory chip maker SK Hynix rose 2.1%.

“The reason why stocks are rising despite the weak earnings result is… that investors are hoping that Samsung will need to reduce production, as Micron or SK Hynix said they would, which would help the memory industry in general,” he said. Eo Kyu-jin, analyst at DB Financial Investment.

Samsung had said in October that it did not expect much change in its investment for 2023. Analysts said the company has a history of not announcing cuts in memory chip production, but could organically adjust investment by delaying equipment entry, as well as in other ways.