Samsung Electronics reported a significant drop in its Q4 operating profit, with a decrease of nearly 70% compared to the same period the previous year. The decline was attributed to the global economic slowdown affecting the sales of electronics and the semiconductors that drive them.
Samsung, the largest mobile phone and memory chip manufacturer, announced a 69% decrease in its Q4 operating profit to a record low of 4.3 trillion won ($3.49 billion), compared to the previous year.
This marks the tech giant’s lowest quarterly operating profit since Q3 2014, and 18.6% lower than the estimated average by Yonhap Infomax, the financial data subsidiary of Yonhap News Agency.
Samsung reported an 8% decrease in sales, totaling 70.46 trillion won, for the Q4 ending December 31. The company attributed the decline to “weak demand amid a global economic slowdown” in a statement.
Samsung’s chip division, which accounted for 56% of the company’s total profit in the previous year, suffered due to decreased spending by semiconductor buyers in the face of growing inventory and a surplus that led to lower chip prices.
The chip division reported a significant drop in operating profit, from 8.84 trillion won to 0.27 trillion won, a decrease of 96.9%. Sales also decreased from 26.01 trillion won to 20.07 trillion won.
Samsung stated that “Overall memory demand weakened as customers continued to adjust their inventories amid deepening uncertainties in the external environment.”
Tech research firm Gartner reported a 10% YoY decline in global memory chip revenue, as electronic equipment makers depleted their memory inventory due to weaker demand. In H2 of last year, consumers reduced spending on PCs and smartphones, followed by enterprises cutting back in anticipation of a global recession, further impacting semiconductor growth.
Samsung Electronics Vice Chairman Han Jong-hee anticipates ongoing macroeconomic challenges this year. He stated at a CES 2023 briefing in Las Vegas that Samsung was impacted by weakened demand and rising costs due to external factors. He believes the challenging business environment will persist due to a prolonged economic slowdown and increased supply chain risks.
Samsung’s foundry business, which provides contract chip manufacturing, reported record quarterly sales. The business saw a YoY increase in profit due to capacity expansion and diversification of customers and applications, according to the company. No specific figures were provided. Samsung’s mobile business reported 26.9 trillion won in sales and 1.7 trillion won in operating profit for Q4.
Samsung stated that the smartphone market remained weak in Q4, with the mass market contracting due to inflation and geopolitical instability. The decrease in mass-market smartphone sales was greater than expected, but flagship sales performed better than market projections
Samsung warned that global demand for smartphones will decline this year, mainly due to weak demand for mass-market models.