Samsung estimates quarterly profits sank to an 8-year low on falling demand | CNN Business

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Reuters
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Samsung Electronics on Friday saw its quarterly profit fall to an eight-year low as a weakening global economy hit memory chip prices and dampened demand for electronic devices.

Profits at the world’s largest maker of memory chips, smartphones and TVs are expected to fall again in the current quarter, analysts said, after Samsung announced that its October operating profit -December likely fell 69% to 4.3 trillion won ($3.37 trillion) from 13.87 trillion won. a year before

It was Samsung’s ( SSNLF ) smallest quarterly profit since the third quarter of 2014 and fell short of a Refinitiv SmartEstimate of 5.9 trillion won, which is weighted based on analysts’ forecasts that are more accurate .

“All of Samsung’s businesses had a tough time, but especially chips and mobiles,” said Lee Min-hee, an analyst at BNK Investment & Securities.

Quarterly revenue likely fell 9 percent from the same period a year earlier to 70 trillion won, Samsung said in a brief preliminary earnings release. Asia’s fourth-largest listed company by market value will release detailed earnings later this month.

Rising global interest rates and the cost of living have dampened demand for smartphones and other devices Samsung makes and also for the semiconductors it supplies to rivals including Apple ( AAPL ).

“For the memory business, the fourth-quarter demand decline was larger than expected as customers adjusted inventories in an effort to further tighten finances,” Samsung said in the statement

Profits at its mobile business declined in the fourth quarter as smartphone sales and revenue declined due to weak demand stemming from prolonged macroeconomic issues, Samsung added.

“Memory chip prices fell by an average of 20% in the quarter, and high-end phones such as foldables did not sell as well,” said BNK Investment’s Lee.

Three analysts said they expected Samsung’s profits to fall again in the current quarter, with a likely operating loss for the chip business as the glut causes a further drop in memory chip prices.

Samsung shares rose 0.3% in morning trade on Friday, underperforming a 0.6% rise in the broader market. Shares in rival memory chipmaker SK Hynix rose 1%.

“The reason the stock is rising despite the poor earnings result is … investors expect Samsung to cut production, as Micron or SK Hynix said they would, which would help the industry memory in general,” said Eo Kyu-jin, an analyst at DB Inversió Financera.

Samsung had said in October that it did not expect much change in its investments from 2023. Analysts said Samsung has a history of not announcing production cuts in memory chips, but could adjust investment organically by delaying the addition of equipment or otherwise.