Samsung Profit Drops 69 Percent Amidst Chip Slump

Samsung Electronics expects operating profit drop of 69 percent year-on-year for fourth quarter amidst lower electronics demand

Samsung Electronics has said it expects its operating profit to drop 69 percent year-on-year in the fourth quarter of 2022 amidst slumping demand for consumer electronics, including smartphones.

In preliminary figures given late on Friday the world’s biggest producer of memory chips said customers were clearing their inventories and that demand and prices had fallen more than it expected.

Smartphone sales and revenue also declined due to “weak demand resulting from prolonged macro issues”, the company said.

Samsung’s operating profit dropped to 4.3 trillion won ($3.4bn, £2.8bn) for the quarter, down 69 percent from 13.87tn won a year earlier.

Memory glut

It was Samsung’s worst profit decline since the third quarter of 2014 and fell well short of analysts’ 5.9tn won estimate.

Analysts expect the memory glut to worsen in the current quarter before demand recovers in the second half. Samsung is due to present final figures for the quarter on 31 January.

Semiconductor association SEMI Taiwan said increasing demand for car chips may shore up the semiconductor this year, amidst the introduction of electric vehicles and driver-assistance systems.

Samsung is the latest to show the effects of a massive drop in spending on electronics and internet services, following a peak in 2020 and 2021 amidst prolonged Covid-19 lockdowns.

Tech slump

US chipmaker Micron has said it doesn’t expect a recovery until the second half of this year and in December laid off some 10 percent of its workforce.

The South Korean government last month announced tax breaks for chip manufacturers in an effort to boost the sector, saying last week it wanted to expand the incentives even further.

Outside the chip industry, Amazon said last week it would cut more than 18,000 jobs, the largest in its history, following a surge of growth during the pandemic.

Meta said in November it would cut 13 percent of its workforce, or 11,000 staff, the first mass layoffs in its history.