(2nd LD) Samsung Electronics: Q4 operating profit down nearly 70%
SEOUL, January 31. (Yonhap) — Samsung Electronics Co. said Tuesday that operating profit fell nearly 70% in the fourth quarter of 2022 as a global economic slowdown hit device sales, electronic devices and semiconductors.
The world’s largest mobile phone and chip maker said its October-December operating profit fell 68.95% from a year earlier to an eight-year low of 4.3 trillion won ($3.49 billion). This is the lowest operating profit since the third quarter of 2014 and 18.6% below the average estimate of Yonhap Infomax, the financial arm of Yonhap News Agency.
According to the company, sales during the period fell 8 percent to 70.46 trillion won. “The business environment deteriorated significantly in the fourth quarter due to weak demand amid the economic slowdown,” the company said in a statement.
The company’s chip business, which accounted for about 56% of the company’s total profit a year ago, has been hit hard by semiconductor buyers cutting costs amid rising inventories and… an oversupply that has depressed chip prices. The business reported an operating profit of 270 billion won, down 96.9 percent from 8.84 trillion won a year ago. Sales fell to 20.070 billion won from 26.010 billion won during the period.
“Demand for memory chips has weakened as consumers continue to adjust inventory amid growing uncertainties in the external environment,” Samsung said. Global memory chip revenues fell 10% last year as electronics makers “started to reduce inventory on hand in anticipation of strong demand,” according to market research firm Gartner.
In the second half of last year, consumers “started to cut back on spending and businesses started to cut back on spending ahead of the global recession, all of which weighed on half-year growth.” he said.
Han Jong-hee, vice president of Samsung Electronics, predicted that macroeconomic challenges will continue throughout the year. “Samsung has been hit hard by deteriorating overseas factors such as weak demand and rising costs,” he said at a press briefing at the 2023 Consumer Electronics Show (CES) in Las Vegas earlier this month. “I believe this challenging environment will continue this year as the prolonged economic downturn and supply chain risks increase uncertainty.”
The company said, without providing specific figures, that its foundry business posted record quarterly sales and profits also grew due to “advanced hub capacity expansion, customer base and application diversification.”
Samsung’s mobile business reported fourth-quarter revenue of 26.9 trillion won and operating profit of 1.7 trillion won. According to Samsung, “market demand for smartphones remained weak in the fourth quarter due to high inflation and geopolitical instability.” “Although flagship product sales were better than market expectations, the impact of declining smartphone sales was greater than expected.”
The company has warned that demand in the global smartphone market will decline this year, mainly due to weak demand for mass-market models. Samsung’s operating profit for the full year 2022 was 43.47 trillion won, down 16 percent year-on-year. Annual sales rose 8.1 percent to 302.23 trillion won.