Analysts say Samsung’s quarterly profit could hit 6-year low as consumers cut spending

Samsung’s quarterly profit is likely to fall 58% to a six-year low as the global economic downturn dampens demand for electronic devices and clouds the memory chip industry’s outlook.

With consumers and businesses reducing spending and investment in the face of high inflation and escalating interest rates, smartphone makers and other customers have held back, analysts said. memory chip orders, while smartphones sold at lower prices due to falling demand.

SAMSUNG, as the world’s largest maker of memory chips, smartphones and TVs, is the highlight of global consumer trends. Preliminary results are expected to be released on Friday and full results are expected later this month.

The operating profit of Asia’s fourth-most valuable listed company could fall to 5.9 trillion won (about 40,000 rupees) in the October-December quarter, according to Refinitiv SmartEstimate from 21 analysts .

That would be Samsung’s lowest quarterly profit since Q3 2016 and compared with an operating profit of 13.87 trillion KRW (approximately Rs 90,000) a year earlier.

Kim Roko, analyst at Hana Financial Investment, said: “The main reason for the operating results… is the sharp drop in demand. Both shipments as well as prices of chips and smartphones are expected. will not be as expected.

SmartEstimates are weighted for more consistently accurate analyst forecasts.

Operating profit for Samsung’s chip business could drop 78% to 1.9 trillion won (about Rs 12,500 crore), the average of seven analyst estimates showed.

Chips typically account for about half of the tech giant’s profits.

Prices for some DRAM memory chips, widely used in smartphones and PCs, have fallen 40% over the past year, while prices for NAND flash chips, used in data storage, have fallen 14%, according to TrendForce data.

Memory chip rivals SK Hynix and Micron Technology have sharply slashed planned investments in 2023 to meet the memory’s deceleration cycle, which is expected to last at least until the second half of the year. 2023.

However, analysts said, Samsung is expected to use its rich pockets during this downturn to expand market share by maintaining the bulk of its investment plans, as so it can take advantage when the memory chip market eventually recovers.

Samsung said in October that it doesn’t expect much change to its 2023 investments. It had about 128.82 trillion KRW (approximately 8.5 million Rs) in cash as of the end of September.

Samsung’s mobile business is also expected to see profits slump, with forecasts showing a 14% drop to KRW 2.3 trillion (approximately Rs 15,000) this quarter.

According to estimates by data provider Counterpoint, its phone shipments could reach 63 million in the quarter, including 62 million smartphones. This compares to 72 million handsets shipped in Q4 2021.

Samsung shares fell about 29% in 2022 before rebounding this week when South Korea announced plans to reduce taxes on investments in semiconductors. That compares with a 36% drop for the Philadelphia Semiconductor index last year.

© Thomson Reuters 2023