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Samsung Expects Smartphone Demand to Decline YoY as Firm Reports 69 Percent Plunge in Quarterly Profit

Samsung said persistent macroeconomic uncertainty will make for a tough first half year, after reporting its lowest quarterly profit since 2014.

Samsung Expects Smartphone Demand to Decline YoY as Firm Reports 69 Percent Plunge in Quarterly Profit

Photo Credit: Samsung

Samsung plans to unveil its latest Galaxy S flagship smartphones later this week

Highlights
  • Samsung had reported a 69 percent plunge in fourth-quarter profit
  • Some analysts expect chip business to book a loss in the first quarter
  • Samsung may see demand starting to recover in the second half
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Samsung on Tuesday reported its lowest quarterly profit since 2014 and said persistent macroeconomic uncertainty will make for a tough first half year, though demand is likely to start recovering in the second half.

Sluggish demand and inventory adjustment will continue to impact the chip business in the first quarter, Samsung said in a statement, adding it expects "smartphone demand to decline year-on-year due to the economic slowdown in major regions".

The world's biggest maker of memory chips and smartphones reported a 69 percent plunge in fourth-quarter profit, as consumer demand for electronic devices dropped while clients spent less in a weak economy, dragging down memory chip prices.

At KRW 4.3 trillion (roughly Rs. 29,000 crore), October-December operating profit was Samsung's lowest quarterly profit in eight years. Revenue fell 8 percent to KRW 70.5 trillion won (roughly Rs. 4.7 lakh crore).

With memory chip prices falling by double-digit percentages in 2022, Samsung's chip profit likewise tumbled - to about KRW 270 billion (roughly Rs. 1,800 crore) in the fourth quarter from KRW 8.83 trillion (roughly Rs. 58,600 crore) in the same period a year prior, marking the lowest since a 2011 change in accounting standards, Samsung's website showed.

Some analysts expect the chip business to book a loss in the first quarter, pulling overall profit below that of the fourth.

Last week, chipmaker Intel said it expects to lose money in the current quarter as the personal computer industry experiences a chip glut.

Memory chip rivals Micron Technology and SK Hynix had already said they would slash investment in 2023.

Investors will be watching for whether Samsung avoids mentioning a direct chip production cut - as is its usual stance - or rather gives a clear signal of production cuts given the severity of the memory chip down-cycle.

In mobile, Samsung said fourth-quarter profit fell to KRW 1.7 trillion (roughly Rs. 11,300 crore) from KRW 2.66 trillion (roughly Rs. 18,000 crore) a year earlier, as a decline in low- and mid-end smartphone sales were greater than expected due to "continued inflation and geopolitical instability."

Samsung plans to unveil its latest Galaxy S flagship smartphones later this week.

Shares in Samsung fell 2.1 percent in morning trade, versus a 0.2 percent drop in the wider market.

© Thomson Reuters 2023


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