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Samsung's profit drops for the first time in 3 years

Samsung reported its first profit drop in three years for the third quarter as demand for memory chips dip.
Written by Cho Mu-Hyun, Contributing Writer on
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Image: Samsung

Samsung on Friday said it expected an operating profit of 10.8 trillion won and revenue of 76 trillion won for the third quarter this year in its preliminary earning guidance.

Operating profit dipped 31.73% from a year ago and is the tech giant's first year-on-year profit drop in three years. Revenue, however, did increase slightly compared to a year ago by 2.73%.

While Samsung is yet to disclose its full third-quarter earnings, which it will do so near the end of the month, analysts expect the company's profit drop to have been caused by lowered demand for memory chips.

After nearly three years of high demand, especially from the server sector, customers were readjusting their memory chip inventory and were more conservative on their spending, analysts in South Korea said.

Prices of DRAM and NAND had been in steady decline since the start of the year and this trend is expected to continue for the remainder of 2022.

Demand for consumer electronics such as TVs and home appliances is also expected to have been low during the quarter as it was since the start of this year after high demand for them during the pandemic that has since soured due to inflation.

However, Samsung's mobile business is expected to have seen quarter-to-quarter growth thanks to the launch of new foldable phones.

The tech giant's display business unit, Samsung Display, is also expected to have seen a significant profit jump thanks to its customer Apple launching their iPhone 14 series of smartphones. Cupertino uses OLED panels made by Samsung Display for its iPhones.

Samsung Foundry, the company's contract chip-producing business unit, is expected to have reported solid growth during the quarter as the chip shortage continues.

Meanwhile, Samsung System LSI, the tech giant's business unit that designs logic chips, is expected to have seen low demand during the quarter.

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