Samsung earns significantly less due to weaker chip demand
The weakening world economy has clearly left its mark on the South Korean electronics group Samsung. It is the first time in eight years that profit from ordinary operations has fallen below five trillion won in a quarter.
Employees walk past a logo of the Samsung Electronics Co. at its office in Seoul, South Korea, Wednesday, April 28, 2021. Samsung’s founding family will donate tens of thousands of rare artworks, including Picassos and Dalis, and give hundreds of millions of dollars to medical research to help them pay a massive inheritance tax following last year’s death of chairman Lee Kun-Hee. (AP Photo/Ahn Young-joon)
Operating profit in the fourth quarter of 2022 is likely to have declined 69 percent year-on-year to 4.3 trillion won (about 3.2 billion euros), the market-leading maker of smartphones and memory chips said in its earnings outlook on Friday.
Samsung expects sales to decline by 8.6 percent to around 70 trillion won (52.6 billion euros). Against the background of external uncertainties, the company has recorded a “significant slump in the memory business due to sluggish demand,” it said. In addition, sales of smartphones were weaker.
Samsung traditionally only presents exact business figures at a later date. But apart from that, the group said it was forced to state the reasons for the decline this time in order to “keep the confusion in the market low and increase investor understanding” before the actual results were published at the end of January. The preliminary results were well below market expectations.
The lower demand for memory chips from the company was also greater than expected. Customers would have reduced their inventories in order to save. They are worried about flagging consumer sentiment given high interest rates and the weak economic outlook. As a result, prices have also fallen.