Samsung Chip Business Posts Profit Plunge

Samsung to continue investing in chip production capacity even as it sees poor conditions for first half of year

Samsung has said it plans to continue spending on new chip production facilities, even as it reported a plunge in profits at its chip business for the fourth quarter.

The chip business reported 270 billion won ($220m, £178m) in profits for the quarter ended December, down from 8.83tn won a year earlier, as consumers bought fewer electronic gadgets amidst rampant inflation and high interest rates.

But Samsung said on Tuesday it is planning a “similar amount of capital spending this year to last year’s” and that it expects chip demand to recover in the second half of 2023.

Samsung spent 53.1tn won on capital in 2022, including 47.9tn for the semiconductor business.

chip, semiconductor

Investment plans

The South Korean firm said it is continuing with its past strategy of investing in a downturn in order to gain market share when demand picks up.

Rivals including SK Hynix, Kioxa Holdings and Micron Technologies have opted for cuts in capital expenditure and production amidst record inventory levels.

Samsung’s fourth-quarter revenues fell 8 percent year-on-year to 70.5tn won, while operating profit fell 69 percent to 4.3tn won, an eight-year low.

Falling smartphone sales contributed to the decline, and Samsung said it expects handset sales to continue falling this year due to challenging macroeconomic conditions.

Long-term planning

Samsung executive vice-president Jaejune Kim told analysts market conditions were “not favourable” for the year ahead, but this gives Samsung “a good opportunity to thoroughly prepare for the future”.

“We will continue to invest in infrastructure to meet mid-to-long-term demand,” Kim said.

Tech companies are grappling with a rapid fall-off in consumer demand after two years of sharp growth spurred by pandemic lockdowns.

Intel has said it is expecting one of the worst quarters in its history, while Microsoft has announced 10,000 job cuts, even as its profits exceeded analysts’ estimates.