Samsung’s quarterly profit hits 8-year low amid weak demand for memory chips, smartphones
Samsung Electronics’ operating profit plunged 69%, to $3.4 billion, in the quarter ended December. Its preliminary estimates show that this is an eight-year low. This was due to the slowing economy and high inflation.
“Amid continued external uncertainties, including a potential global economic downturn, overall earnings decreased sharply quarter on quarter as we saw a significant drop in the memory business results due to lackluster demand and weaker sales of smartphones,” the company said in a statement.
The quarter saw sales of 70 trillion won ($55billion) by the smartphone manufacturer and memory chipmaker, a decrease of 8.6% compared to the previous year.
According to the Associated Press, the sharp decline in demand for memory chips such as DRAM or NAND that are used in gadgets has prompted vendors and manufacturers to reduce their prices. TrendForce.
“For the memory business, the decline in the fourth quarter demand was greater than expected as customers adjusted inventories in their effort to further tighten finances by concerns over deteriorating consumer sentiment,” the market researcher said. “Profits from the mobile experience business declined as smartphones sales and revenue decreased due to weak demand resulting from prolonged macro issues.”
Numerous chip companies, including Micron SK Hynix and SK Hynix plan to reduce their capital expenditures This year, reduce inventories Samsung previously stated it didn’t intend to lower its capex.
Another concern for semiconductor companies caught up in the U.S.-China tech war is geopolitical risks. The U.S. implemented new export controls last October that required companies to get licenses to sell supercomputer chips and artificial intelligence to Chinese companies.
Samsung reportedly A one-year waiver was granted by the US government to allow it to continue ordering U.S. chips manufacturing equipment to its fabs, including the NAND flash storage chip plant in Xi’an as well as a Suzhou chip-packaging facility. Even though the U.S. exemption allows for the maintenance of the facilities in China there is always the risk that U.S. sanctions could have a broad impact on chip firms serving customers in China.
South Korea said earlier this week that it plans to increase tax breaks for semiconductor companies in a bid to support Korean chip companies and beef up the country’s critical industry. This is after Samsung and SK Hynix were among the top 100 global chip manufacturers in 2021.
According to South Korea’s finance ministry, the large conglomerates of South Korean chip companies will receive a 15% tax credit on investments in manufacturing facilities. Small and medium-sized semiconductor companies, however, will be eligible for a 25% tax break, which is up from the 16% that was planned.
The tech giant will issue a full earnings report, including net profit, for its fourth quarter. More details will be available at the end of the month.