Samsung's fourth-quarter profit nosedives amid chip downturn and weakening smartphone demand
Samsung's profit in the fourth quarter last year dropped nearly 70% from a year prior due to low demand for semiconductors and smartphones caused by the global economic downturn.
The South Korean tech giant said in its earnings guidance on Friday that it expected an operating profit of 4.3 trillion won and a revenue of 70 trillion won for the fourth quarter of 2022. Revenue dropped approximately 9% from a year prior while operating profit dipped by 69% over the same time period.
Also, operating profit dropped by more than half from the third quarter when Samsung saw its first year-on-year profit decline in three years as demand for chips began to weaken significantly.
In a statement concerning the fourth quarter, Samsung said it saw a significant drop in earnings from the memory business due to lackluster demand while also seeing weaker sales of smartphones, amid continued external uncertainties including "a potential global economic downturn".
The company said the decline in demand for memory chips during the fourth quarter was greater than expected as customers adjusted their inventories to tighten their finances. This also caused the average sales prices of chips to drop more than expected, Samsung added.
Prolonged macro issues also caused weak demand for smartphones, the South Korean tech giant said, while sluggish demand and increased cost burdens for home appliances continued.
South Korean analysts largely expect the downturn in the global memory chip market, which is happening after years of high growth, to continue until at least the first half of 2023 while remaining weak throughout the year compared to 2022.
Samsung's chip business may see its first operating loss in nearly ten years sometime next year, according to analysts.
The tech giant will announce its full earnings report near the end of the month.