Samsung’s Quarterly Profit Could Hit Six-Year Low as Consumers Cut Spending, Analysts Say

Samsung’s quarterly revenue will doubtless plunge 58 p.c to its lowest in six years as a world financial downturn saps demand for digital gadgets and clouds the outlook for the reminiscence chip trade.

With shoppers and companies lowering spending and funding within the face of excessive inflation and climbing rates of interest, smartphone makers and different shoppers held again reminiscence chip orders, whereas smartphones bought for much less as demand suffered, analysts stated.

Samsung, because the world’s largest maker of reminiscence chips, smartphones and TVs, is a bellwether for international consumption traits. It’s anticipated to announce preliminary outcomes on Friday and full outcomes later this month.

Working revenue for Asia’s fourth most precious listed firm doubtless fell to KRW 5.9 trillion (roughly Rs. 40,000 crore) within the October-December quarter, in keeping with a Refinitiv SmartEstimate from 21 analysts.

That will be Samsung’s lowest quarterly revenue because the third quarter of 2016 and compares with an working revenue of KRW 13.87 trillion (roughly Rs. 90,000 crore) a yr earlier.

“The principle purpose for the efficiency…is a pointy drop in demand. Each shipments and costs of chips and smartphones are anticipated to fall wanting earlier expectations,” stated Kim Roko, analyst at Hana Monetary Funding.

SmartEstimates are weighted towards forecasts from analysts who’re extra constantly correct.

Working revenue for Samsung’s chip enterprise doubtless tumbled by 78 p.c to KRW 1.9 trillion (roughly Rs. 12,500 crore), a median of seven analyst estimates confirmed.

Chips often account for about half of the tech large’s income.

Costs of some DRAM reminiscence chips, broadly utilized in smartphones and PCs, plunged 40 p.c over the yr, whereas costs for NAND flash chips, utilized in information storage, fell 14 p.c, in keeping with TrendForce information.

Reminiscence chip rivals SK Hynix and Micron Know-how have sharply lower deliberate 2023 investments in response to the reminiscence downcycle, which is anticipated to final at the least till the second half of 2023.

Nonetheless, Samsung is anticipated to make use of its deep pockets throughout this downturn to develop market share by largely sustaining its funding plans, analysts stated, so it may be in place to take benefit when the reminiscence chip market ultimately rebounds.

Samsung stated in October that it didn’t count on a lot change to its 2023 investments. It had about KRW 128.82 trillion (roughly Rs. 8.5 lakh crore) in money as of end-September.

Samsung’s cellular enterprise can be anticipated to see income shrink, with forecasts calling for a 14 p.c fall to KRW 2.3 trillion (roughly Rs. 15,000 crore) for the quarter.

Its handset shipments doubtless reached 63 million within the quarter, together with 62 million smartphones, in keeping with information supplier Counterpoint’s estimate. That compares with 72 million handsets shipped within the fourth quarter of 2021.

Samsung shares fell about 29 p.c in 2022 earlier than rebounding this week as South Korea introduced deliberate tax breaks for semiconductor investments. That in contrast with a 36 p.c stoop for the Philadelphia Semiconductor index final yr.

© Thomson Reuters 2023