Samsung’s quarterly profit fell to an eight-year low as demand slumped

  • Consumers panicked and tightened spending
  • Q3 was the lowest profit since 2014
  • Samsung’s Q1 profit will show another decline—analysts
  • Shares rose 1.4%, outperforming the broader market

SEOUL, Jan 6 (Reuters) – Samsung Electronics Co Ltd (005930.KS) Its quarterly profit fell by two-thirds to an eight-year low on Friday as a weakening global economy dampened memory chip prices and demand for electronics.

A poor profit estimate from the world’s largest memory chip, smartphone and TV maker — a bellwether for global consumer demand — set a weak tone for other tech companies’ quarterly results.

Samsung’s profits are expected to shrink again in the current quarter, with the South Korean company reporting a 69% drop in its October-December operating profit to 4.3 trillion won ($3.37 billion) from 13.87 trillion won a year ago.

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

“All of Samsung’s businesses have had a tough time, but chips and mobile in particular,” said Lee Min-hee, an analyst at BNK Investment & Securities.

Quarterly revenue fell 9% to 70 trillion won, Samsung said in a short preliminary earnings report. Asia’s fourth largest listed company by market value will release detailed earnings on January 31.

Reuters Graphics

Rising global interest rates and cost of living have dampened demand for smartphones and other devices manufactured by Samsung (AAPL.O).

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

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Profits in its mobile business fell in the fourth quarter as smartphone sales and revenue declined due to weak demand resulting from prolonged macroeconomic issues, Samsung added.

“Memory chip prices fell 20% in the middle of the quarter, and high-end phones such as foldables are not selling well,” said BNK Investment’s Lee, whose display business has been hit by production delays at client Apple. World’s largest iPhone factory in China in quarter

Three analysts said they expect Samsung’s profits to fall again in the current quarter, and a glut in memory chip prices could lead to an operating loss for the chips business.

Samsung shares closed 1.4% higher on Friday, ahead of the broader market’s 1.1% rise (.KS11). Shares of rival memory chip maker SK Hynix (000660.KS) 2.1% higher.

“Shares rise despite poor earnings…Investors believe Samsung will cut production like Micron. (MU.O) or SK Hynix (000660.KS) They said that would help the memory industry as a whole,” said Eo Kyu-jin, an analyst at DB Financial Investment.

Samsung had said in October that it did not expect a major change in its 2023 investments. Samsung has a history of not announcing memory chip production cuts, but could naturally adjust investment by delaying equipment shipments or other means, analysts said.

($1 = 1,274.1900 won)

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

Our Standards: Thomson Reuters Trust Principles.

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