An eight-year low in quarterly profit was reported by Samsung Electronics on Friday (Jan. 6), as a deteriorating global economy crushed memory chip prices and reduced demand for electronic products.
Analysts predict that profits at the world's largest manufacturer of memory chips, smartphones, and TVs will decline once more in the upcoming quarter after Samsung revealed that its operating profit for the three months of October through December likely decreased by 69% to 4.3 trillion won ($3.37 billion) from 13.87 trillion won a year earlier.
The company's quarterly earnings were the lowest it had been since the third quarter of 2014, and it fell short of the 5.9 trillion won Refinitiv SmartEstimate, which gives more weight to analyst projections that have a history of being right.
Samsung stated in a brief preliminary earnings report that quarterly revenue likely decreased by 9% from the same time a year earlier to 70 trillion won. Later this month, the fourth-largest listed firm in Asia by market value is expected to announce specific earnings.
The demand for smartphones and other products made by Samsung as well as for the semiconductors it provides to rivals like Apple Inc. has been slowed down by rising global interest rates and the expense of living.
"For the memory business, the decline in fourth-quarter demand was greater than expected as customers adjusted inventories in their effort to further tighten finances ...," Samsung said. Samsung added that the weak demand brought on by ongoing macroeconomic problems caused smartphone sales and revenue to dip in the fourth quarter, which led to a decline in its mobile business earnings.
"Memory chip prices fell in the mid-20% during the quarter, and high-end phones such as foldable didn't sell as well," BNK Investment's Lee said.
Three analysts predicted that Samsung's profits would plunge once further in the upcoming quarter, with the chips company likely seeing an operational loss as the price of memory chips continued to fall due to a supply glut.
In early Friday trade, Samsung shares increased 0.3%, underperforming the market as a whole, which increased by 0.6%. Shares of competing memory chip manufacturer SK Hynix increased by 1%.
"The reason shares are rising despite the poor earnings result is.. investors are hoping Samsung will need to reduce production, like Micron or SK Hynix said they would, which would help the memory industry overall," Eo Kyu-jin, an analyst at DB Financial Investment said.
In October, Samsung stated that it didn't anticipate many changes to planned 2023 investments. According to analysts, Samsung has a history of not publicly reporting reductions in memory chip manufacturing, but it may naturally adjust investment by delaying the influx of equipment or in other ways.
