Samsung Electronics said on Friday its quarterly profit fell to the lowest level in eight years as a sluggish global economy weighed on memory chip prices and reduced demand for electronic devices.
Profits at the biggest maker of memory chips, cellphones and TVs will fall further in the current quarter, analysts said, after Samsung said its October-December operating profit was likely to fall 69% to 4.3 trillion won ($3.37 billion). ) or 13.87 billion won. a year ago
That's Samsung's ( SSNLF ) smallest quarterly profit since the third quarter of 2014 and is lower than the Refinitiv SmartEstimate's profit of $5.9 billion, which is weighted by more accurate analyst forecasts.
"All of Samsung's businesses have had a difficult time, but especially chips and mobile phones," says Lee Min-hee, an analyst at BNK Investment & Securities.
Quarterly sales are expected to have fallen 9% year-on-year to 70 billion won, Samsung said in a brief preliminary statement. Asia's fourth-largest public company by market value will announce detailed results this month.
Rising global interest rates and the cost of living have dampened demand for Samsung's phones and other equipment, as well as the semiconductors the company supplies to rival Apple ( AAPL ).
"For the memory business, the decline in demand in the fourth quarter was larger than expected as customers adjusted inventory levels to further tighten finances," Samsung said in a statement.
Mobile business profits fell in the fourth quarter as smartphone sales and revenue fell due to weak demand amid continued macroeconomic challenges, Samsung added.
"Memory chip prices fell 20% in the quarter, and high-end phones such as foldables also did not sell," says Lee of BNK Investment.
Three analysts expect Samsung's profit to fall again in the current quarter, with a possible operating loss in its chip business as flooding pushes memory chip prices down further.
Shares of Samsung rose 0.3% in morning trade on Friday, missing a 0.6% rise in the broader market. Shares of rival memory chip maker SK Hynix rose 1%.
"Despite poor earnings results, the reason for the stock rally is... Investors expect Samsung to cut production like Micron or SK Hynix said, which will help the memory industry as a whole," says Eo Kyu. analyst DB Financial Holding.
Samsung said in October that it does not expect major changes in its investments for 2023. Analysts say Samsung has not cut memory chip production in the past, but could adjust investments organically by slowing device imports or otherwise.