Samsung Electronics Co Ltd reported today (Jan 6) a likely 69% plunge in December-quarter operating profit to an eight-year low, as a global economic downturn saps demand for electronic devices and clouds the memory-chip industry outlook.
The world’s largest memory chip, smartphone and TV maker estimated its profit slumped to 4.3 trillion won (RM14.8 billion) in October-December from 13.87 trillion won a year earlier.
It was Samsung’s smallest quarterly profit since the third quarter of 2014 and fell short of a 5.9 trillion won Refinitiv SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate.
“For the memory business, the decline in fourth-quarter demand was greater than expected as customers adjusted inventories in their effort to further tighten finances, spurred by concerns over deteriorating consumer sentiment caused by continued high global interest rates and weak economic outlooks,” Reuters cited Samsung saying in a statement.
Revenue likely fell 9% from the same period a year earlier to 70 trillion won, Samsung said in the short preliminary earnings release.
Samsung said that memory chip prices also declined throughout the quarter due to increased inventory at memory suppliers, leading to a greater-than-expected drop in chip prices.
Its mobile business profit declined in the fourth quarter as smartphone sales and revenue decreased due to weak demand resulting from prolonged macroeconomic issues, Samsung added.
Asia’s fourth-biggest company by market value is due to release detailed earnings later this month.
The current memory chip downcycle that began last year is expected to worsen in the current quarter, analysts said.
“The biggest reason is memory prices falling … as of now, we expect first-quarter earnings to be worse because memory prices are expected to continue to fall,” said Greg Roh, head of research at Hyundai Motor Securities. Samsung shares rose 1.4% in morning trade today, versus a 0.2% rise in the wider market.
