Samsung profit slumps, worries over future revenue

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Samsung Electronics forecast a 23% drop in profits due to inflation and global issues affecting the South Korean giant, which says demand for processors is down.

Third-quarter operating profits are expected to have fallen 23.4% quarter-on-quarter. The fall will mark the company’s first quarterly operating profit decline since the fourth quarter of 2019.

In Australia, Samsung insiders told ChannelNews that sales “have slowed in several categories” over the past quarter, including in the smartphone market.

The company said third-quarter sales are expected to be up 2.73% year on year and down 1.55% on the quarter.

Despite the news, Samsung shares fell less than 1% amid analyst concerns that Samsung’s earnings forecast for the July-September period was well below market expectations.

The bulk of Samsung’s profits come from its processor manufacturing business, which in the second quarter accounted for 70% of total operating profits.

Although the earnings forecast does not include detailed figures by business segment, market analysts pointed to a slowdown in the global semiconductor market behind the chipmaker’s sharp drop in operating profits.

Amid the ongoing global economic downturn, demand for smartphones and computers is declining as companies have sought to use inventory chips first rather than buying more semiconductors, leading to a decline memory chip prices.

Choi Do-yeon, an analyst at Shinhan Securities, said “unprecedented supply cuts” in memory chips are expected due to a sharp drop in demand for technology products.

“The semiconductor upcycle that lasted about three years has created the largest stock (chip) load in history. As the upcycle has been going on for a long time, there are concerns about its aftermath,” a- he added.

Samsung’s outlook for the fourth quarter in the semiconductor business also looks bleak. FnGuide analysts predicted that Samsung’s operating profit would fall below 10 trillion won in the next quarter.

DRAM and NAND flash memory prices are expected to fall 13-18% and 15-20% respectively in the fourth quarter, according to global market intelligence firm TrendForce. He said more memory chip vendors are expected to cut semiconductor production to normalize the imbalance between demand and supply next year.

Samsung, however, reiterated that it would continue to produce memory chips even with the risks of falling chip prices and oversupply.

Han Jin-man, senior vice president of Samsung’s memory chip business division, said the company has no talks about cutting chip production at this time during Samsung Tech Day 2022 in San Jose. , in California, on Wednesday.

Samsung Electronics will release its latest third-quarter results on October 27.

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