Samsung’s quarterly earnings hit 8-year low on weak demand for memory chips and smartphones • Alaska Green Light Blog
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Samsung Electronics’ operating profit plunged 69% to $3.4 billion in the quarter ended December, hitting an eight-year low according to preliminary estimates, as global demand for memory chips and smartphones slumped due to high inflation and the slowing economy subsides.
“Amid continued external uncertainties, including a potential global economic downturn, overall earnings declined sharply quarter-on-quarter as we experienced a significant decline in memory business results on weak demand and weaker smartphone sales,” the company said in a statement .
The memory chip and smartphone maker posted revenue of 70 trillion won ($55 billion) in the quarter, down about 8.6% from the same period last year.
The sharp drop in demand for memory chips, including DRAM and NAND, used in gadgets and data centers has also prompted manufacturers and suppliers to drop their prices, according to them TrendForce.
“For the memory business, the fall in demand in the fourth quarter was larger than expected as customers adjusted inventory levels in their effort to further tighten finances amid concerns about deteriorating consumer sentiment,” the market researcher said. “Profits from the mobile experience business declined as smartphone sales and revenue fell due to weak demand amid ongoing macroeconomic concerns.”
Many chip companies including micron and SK Hynix plan to cut capital spending and inventory levels this year. Samsung has previously said it has no plans to scale back its investments.
Geopolitical risk is another concern for semiconductor companies caught up in the US-China tech war. Last October, the US introduced new export controls that require companies to obtain licenses to sell semiconductor chips used in supercomputers and artificial intelligence to Chinese companies.
Samsung allegedly has received a one-year waiver from the US government to continue ordering US chip manufacturing equipment for its factories in China, such as Such as the NAND flash memory chip factory in Xi’an and a chip packaging plant in Suzhou. Despite the exception of having facilities in China, there is always a risk that the US restriction could hit chip companies with customers in China broadly.
South Korea said earlier this week that it plans to increase tax breaks for semiconductor companies to support Korean chip companies and boost the country’s vital industry. The move comes after Samsung and SK Hynix paid the highest corporate taxes in 2021 among the top 100 global chipmakers, including TSMC, Intel and SMIC.
South Korea’s major chip conglomerates benefit from a 15% tax credit versus a planned 8% on investments in manufacturing facilities; According to the South Korean Ministry of Finance, small and medium-sized semiconductor companies receive a tax break of up to 25% compared to 16%.
The tech giant will report a full earnings report, including net income, for the fourth quarter and will provide more details later this month.