Samsung flagged on Friday its quarterly profit tumbled by two-thirds to an eight-year low as a weakening global economy hits memory chip prices and demand for electronic gadgets.
The dismal profit estimate by the world’s largest memory chip, smartphone and TV maker – a bellwether for global consumer demand – sets a weak tone for other technology firms’ quarterly results. Samsung’s profits are expected to shrink again in the current quarter, analysts said, after the South Korean company 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.
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 such as 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 a statement.
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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. 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 closed 1.4% higher on Friday, versus a 1.1% rise of the wider market. Shares of rival memory chip maker SK Hynix rose 2.1%. Analysts said that Samsung has a history of not announcing memory chip production cuts, but could organically adjust investment by delaying bringing in equipment or in other ways.
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