Samsung’s dismal results are triggered by rising inflation and a sluggish economy.
Samsung Electronics reported a 69% drop in its fourth-quarter profit as high inflation and a weakening global economy hit the cost of memory chips and wore down demand for electronic devices. This is the lowest quarterly profit reported by the company in eight years.
Samsung announced its October-December operating profit sank to $3.37 billion (4.3 trillion won) from $10.935 billion (13.87 trillion won) a year earlier. Total sales also slipped by 9% to about $55.178 billion (70 trillion won) from $60.357 billion (76.57 trillion won) last year.
The company will release detailed earnings on January 31.
“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.
Samsung’s downcast sales are the stark opposite of the trend set during the pandemic when the semiconductor chip shortage shot up prices for electronic components. This triggered a widespread increase in production by major manufacturers.
Samsung Electronics is Asia’s fourth-biggest listed company by market value and is one of the world’s largest memory chip, smartphone and TV maker. The dismal earnings report sets a weak tone for other technology firms’ quarterly results.
Despite that, Samsung executives told analysts that the company had no plans to scale back its chip manufacturing operations, as opposed to broader industry trends that have seen many chipmakers such as Micron Technology and SK Hynix Inc. cut output.
Micron lowered budgets for new equipment and plants and cut costs. The company announced a 10% reduction in its workforce and lowered capital expenditure. SK Hynix said that it’d cut its capex in half for 2023.
