Samsung reports 69% profit slump in Q4-2022 amid weak demand for chips and phones

A bellwether for the shrinking global economy, Samsung’s reported operating profit for the Q4-2022 quarter saw a steep drop of 69% compared to the similar period of 2021. The announcement comes after a confirmed 50% contraction for Q3, ending a three-year period of sustained growth.

In its latest investor bulletin, covering Q4-2022, South Korea confirms operating profit of $3.37 billion, reported on consolidated revenue of about $55 billion. So while the company’s revenue fell by just 9%, operating profit fell by an impressive 69% compared to the same period in 2021.

This is the first multi-quarter profit decline reported by Samsung in three years. According to analysts, Samsung’s profit decline is mostly due to the reduction in demand for memory chips. Due to the global 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 following the COVID pandemic is at least partially over.

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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 during the peak of the pandemic, when social distancing and remote (home) working were the order of the day.

Poor sales and plummeting profits are affecting other industry players, such as Apple and Xiaomi, at least as badly. Indeed, Xiaomi has seen visible signs of unrest at the top of the company, with several senior executives announcing their resignations amid increasingly poor financial results.

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According to analysts, difficult economic conditions will persist throughout 2023, with a chance of recovery only next year.

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