Samsung warns of further chip slowdown due to slowing demand

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Samsung Electronics Co Ltd reported its lowest quarterly profit since 2014 on Tuesday, predicting that persistent macroeconomic uncertainty will make for a difficult first half year, though demand is expected to begin 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 largest memory chip and smartphone manufacturer reported a 69% drop in fourth-quarter profit as consumer demand for electronic devices fell and customers spent less in a weak economy, dragging down memory chip prices.

The October-December operating profit of 4.3 trillion won ($3.49 billion) was Samsung’s lowest quarterly profit in eight years. Revenue decreased by 8% to 70.5 trillion won.

Samsung
credit: economictimes

With memory chip prices expected to fall by double digit percentages in 2022, Samsung’s chip profit fell to around 270 billion won in the fourth quarter, down from 8.83 trillion won in the same period the previous year, according to Samsung’s website.

Some analysts predict that the chip business will lose money in the first quarter, bringing overall profit down from the fourth. Intel Corp said last week that it expects to lose money in the current quarter due to a chip glut in the personal computer industry.

Memory chip rivals Micron Technology Inc and SK Hynix Inc have already announced plans to reduce investment in 2023. Investors will be watching to see if Samsung, as is customary, avoids mentioning a direct chip production cut, or if it gives a clear signal of production cuts given the severity of the memory chip down-cycle.

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