Samsung Electronics marked a 32% worse-than-expected decline in quarterly operating income on Friday, as the economic downturn dampened demand for electronic devices and accompanying memory chips. Samsung’s memory chip shipments may come in below already-lowered expectations, and prices could fall further this quarter as customers react to rising inflation, high interest rates, analysts said. and the impact of Russia’s invasion of Ukraine.
SAMSUNGThe world’s leading maker of memory chips, smartphones and TVs is a supporter of global consumer demand, and its disappointing preliminary results add to a slump in earnings and projections. gloomy newspaper.
Estimated profit fell to 10.8 trillion KRW (approximately Rs 62,900) in July-September – the first year-on-year decline in nearly three years – from 15.8 trillion KRW (approximately 3 years) Rs 92,000) a year earlier, the company said in a preliminary earnings release.
The result was 8.5 percent below KRW 11.8 trillion (about Rs 68,700) from Refinitiv.
Companies and consumers have tightened their ties, with memory chip buyers like smartphone and computer makers retaining new purchases and using up existing inventory, making reduce shipments and open a downward trend of the industry.
“Memory chip business was worse than expected, DRAM Park Sung-soon, analyst at Cape Investment & Securities, said:
Trends in price negotiations seem to suggest that customer demand will decline rapidly during the quarter. “
Analysts expect memory chip prices to continue to decline sharply in the current quarter, causing Samsung’s fourth-quarter profit to continue to decline. Demand is not expected to recover until early next year.
Competitor Micron last week became the first memory chip maker to officially cut its investment plans for next year, and the bigger rival SK Hynix hinted at the possibility of investment cuts.
Chipmaker Advanced Micro Devices on Thursday provided third-quarter revenue estimates about a billion dollars lower than its previous forecast for weak PC demand, signaling the chip’s slump could be much worse than it was. expected.
According to Yonhap news agency, Samsung is not currently discussing cutting memory chip production.
“Investors will be interested in whether Samsung considers cutting capital, plans to maintain many chip devices, or pursues a profit strategy. This will signal supply conditions. chips,” said Park.
Samsung will release detailed earnings on October 27, when executives will also provide press conferences for the media and analysts.
Its shares, which have fallen nearly 30% this year, were up 0.2% in morning trading, compared with a 0.3% drop in the broader market.
Demand for high-end phones
Counterpoint Research says estimated smartphone shipments from Samsung’s mobile business in the third quarter were around 66 million units, down 5% year-on-year, when Samsung launched a foldable phone. its new beginning this quarter.
Liz Lee, Vice President at Counterpoint said: “The luxury and premium segment markets are relatively resilient with steady demand despite the recent dismal economic situation. In the US, “initial sales of the Galaxy Z4 series were higher than sales of the Galaxy Z3 series.”
Analysts say Samsung remains over-exposed to demand-dependent businesses such as mobile phones and memory chips that are vulnerable to the economic downturn, in the absence of a larger market share. in long-term chip manufacturing contracts.
“Samsung needs product lines with a high share of long-term deals, exclusive market dominance and a premium brand favored by consumers,” said Greg Roh, head of research at Hyundai Motor. , but it still takes time to get there.”
Roh added that foldable display panels and advanced molding are “important” for the company to be less affected by the economic downturn.
Quarterly revenue is likely to grow 3% year-on-year to KRW 76 trillion (approximately Rs 62,61,25,000), Samsung said.
© Thomson Reuters 2022
