Feeling the contraction of the global economy, Samsung expects Q3-2022 operating profit to fall sharply, by 31.7%. The timing is all the more significant for the company, being the first forecast contraction after three years of sustained growth.
Samsung Electronics announced the preliminary version of its investor newsletter covering Q3-2022, with the South Koreans estimating an operating profit of $7.65 billion, reported on consolidated revenue of $53.85 billion. Thus, although the company’s revenue rose 2.73%, operating profit fell 31.7 compared to the same period last year.
This is the company’s first profit decline in three years. According to analysts, Samsung’s profit decline is mainly due to reduced demand for memory chips. Because of the current economic downturn, customers expected mostly from the server market have readjusted their component inventories and spending more conservatively. In the absence of demand, DRAM and NAND chip prices have fallen steadily since the beginning of this year, indicating that the semiconductor crisis that followed the COVID pandemic is at least partially over.
COVID also appears to be partly responsible for the current reduction in profits reported by Samsung, with a large proportion of consumers still choosing to keep their smartphones, tablets, TVs, laptops, PCs or home appliances bought out of necessity or on impulse at the height of the pandemic, when social distancing and remote (home) working were the order of the day.
Interestingly, Samsung MX, the company’s smartphone division, performed well helped by its new foldable phone offering, reporting an increase in profits over the previous quarter. Sales of the Galaxy Z Flip 3, Galaxy Z Flip 4, Galaxy Z Fold 3 and Galaxy Z Fold 4 were quite good, according to various analysts, even though Samsung’s sales target of 15 million units may prove too ambitious to be reached anymore under current economic conditions.