Samsung estimates quarterly profit sank to 8-year low on demand slump

FILE PHOTO: The logo of Samsung Electronics is seen at its office building in Seoul, South Korea South Korea, October 11, 2017. REUTERS/Kim Hong-Ji/File Photo

SEOUL (Reuters) -Samsung Electronics Co Ltd flagged on Friday its quarterly profit tumbled to an eight-year low as a weakening global economy hammered memory chip prices and curbed demand for electronic devices.

Profits at the world's largest memory chip, smartphone and TV maker are expected to shrink again in the current quarter, analysts said, after Samsung announced its October-December operating profit likely fell 69% to 4.3 trillion won ($3.37 billion) from 13.87 trillion won a year earlier.

It was Samsung's smallest quarterly profit since the third quarter of 2014 and fell short of a 5.9 trillion won Refinitiv SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate.

"All of Samsung's businesses had a hard time, but chips and mobile especially," said Lee Min-hee, analyst at BNK Investment & Securities.

Quarterly revenue likely fell 9% from the same period a year earlier to 70 trillion won, Samsung said in a short preliminary earnings release. Asia's fourth-biggest listed company by market value is due to release detailed earnings later this month.

Rising global interest rates and cost of living have dampened demand for smartphones and other devices that Samsung makes and also for the semiconductors it supplies to rivals including Apple Inc.

"For the memory business, the decline in fourth-quarter demand was greater than expected as customers adjusted inventories in their effort to further tighten finances...," Samsung said in the statement.

Its mobile business' profit declined in the fourth quarter as smartphone sales and revenue decreased due to weak demand resulting from prolonged macroeconomic issues, Samsung added.

"Memory chip prices fell in the mid-20% during the quarter, and high-end phones such as foldable didn't sell as well," said BNK Investment's Lee.

Three analysts said they expected Samsung's profits to dive again in the current quarter, with a likely operating loss for the chips business as a glut drives a further drop in memory chip prices.

Samsung shares rose 0.3% in Friday morning trade, underperforming a 0.6% rise in the wider market. Shares of rival memory chip maker SK Hynix rose 1%.

"The reason shares are rising despite the poor earnings result is.. investors are hoping Samsung will need to reduce production, like Micron or SK Hynix said they would, which would help the memory industry overall," said Eo Kyu-jin, an analyst at DB Financial Investment.

Samsung had said in October that it did not expect much change to its 2023 investments. Analysts said that Samsung has a history of not announcing production cuts in memory chips, but could organically adjust investment by delaying bringing in equipment or through other ways.

($1 = 1,274.1900 won)

(Reporting by Joyce Lee, Heekyong Yang and Hyunsu Yim; Editing by Muralikumar Anantharaman)

Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!


Next In Tech News

Dutch parliament chair calls on Twitter to prevent threatening messages on platform
Computex highlights: Cooler Master's RM100,000 motorised racing station; keyboards from Ducky, Varmilo, and Zalman
Jail for man in S’pore who let his bank account be used to receive scam money
UAE central bank issues AML/CTF guidance for dealing with virtual assets
British consortium, Swiss Glencore, Indonesia's Aneka Tambang, to invest $9 billion in Indonesia EVs - minister
Panic then back to work after South Korea evacuation false alarm
She sent US$32,000 to scammers who claimed to be from the IRS. Here’s how the scam worked
‘Bruh’: Telegram trolls WhatsApp over new message editing feature
‘Light as a quilt’: Crash diet kills Chinese girl, who slimmed to 25kg for love, sparking fury over toxic beauty standards
Xiaomi partners with Dixon Technologies to make mobile phones in India

Others Also Read