NextGen Day

Samsung Electronics Co. reported on Tuesday that the worldwide economic recession had a negative impact on the sales of electronic products and the semiconductors that power them, causing a roughly 70% drop in operating profit from a year earlier.

The largest manufacturer of mobile phones and memory chips in the world reported that its operating profit for the three months ending in December fell by 69% from the same period last year to a record low of 4.3 trillion won ($3.49 billion).

The internet giant’s operating profit was down every quarter for the first time since the third quarter of 2014, and it was 18.6 percent lower than usual, according to Yonhap Infomax, the news agency’s financial data provider.

Sales for the three months that ended on December 31 decreased by 8% to 70.46 trillion won, according to the business.

The company stated in a statement that “the business environment dramatically deteriorated in the fourth quarter due to sluggish demand amid a global economic slowdown.”

As semiconductor purchasers pulled back on spending amid rising inventories and a supply glut drove down chip prices, Samsung’s chip business, which accounted for around 56% of the tech company’s overall profit a year ago, suffered greatly.

Operating profit for the company was 0.27 trillion won, a sharp decrease from 8.84 trillion won a year earlier. From 26.01 trillion won in sales, they dropped to 20.07 trillion won.

According to Samsung, “overall memory demand fell as customers continued to manage their stocks amid rising environmental worries.”

According to technology research company Gartner, the global memory chip market saw a 10% year-over-year fall in sales last year as electronic equipment manufacturers “began to deplete memory inventory they had been storing in anticipation of increased demand.”

Consumers started to “lower spending” in the second half of last year, which “affected overall semiconductor growth, with PC and smartphone demand weakening, and then companies started to curtail expenditure in expectation of a worldwide recession,” the report stated.

Macroeconomic challenges were anticipated to last the entire year, according to Samsung Electronics Vice Chairman Han Jong-hee.

He stated during a press conference held during CES 2023 in Las Vegas earlier this month that “Samsung was struck a harsh hit with deteriorating external conditions, such decreased demand and increased expenses.”

“I believe this challenging business environment will persist this year as risks in supply chains and a protracted economic slump create concerns,”

Without giving specific numbers, Samsung’s foundry, or contract chip manufacturing, division reported record quarterly revenues and year-over-year profits because of “advanced node capacity expansion, as well as client base and application area diversification.”

For the fourth quarter, Samsung’s mobile division reported sales of 26.9 trillion won and an operating profit of 1.7 trillion won.

In the fourth quarter, Samsung reported that “market demand for smartphones remained sluggish, with the mass market falling substantially due to ongoing inflation and geopolitical turmoil.”

The impact of the drop in mass-market smartphone sales was more significant than initially anticipated, while flagship sales performed admirably in comparison to market expectations.

It issued a warning that the year’s demand for smartphones will decline significantly as a result of weak demand for mass-market models.

Samsung’s operating income for the whole of 2022 decreased by 16% year over year to 43.37 trillion won. Sales grew 8.1 percent annually to 302.23 trillion won.

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