South Korean giant Samsung Electronics said on Friday (January 6th) it expects operating profit to fall 69% year on year in the fourth quarter, weighed down by lower overall demand for electronics. Its October-December operating profit is expected to reach 4.3 trillion won ($3.4 billion) over the period, a steep drop of 13.874 billion won year-on-year.
In a statement, Samsung said its fourth-quarter earnings were “well below current market expectations”, attributing this performance to macroeconomic problems, aggravated by central bank interest rates kept high around the world. Weak demand for memory chips was “bigger than expected as customers adjusted their inventories…to further clean up their finances, being worried about consumer sentiment amid continued high global interest rates and a poor economic outlook.” Against this background, smartphone maker Galaxy has “recorded a significant decline in results in the memory chip sector due to a drop in demand and sales of smartphones”he added.
This is the first time in four years that Samsung has published a press release detailing its situation in parallel with its earnings forecasts. The company is the flagship subsidiary of giant Samsung Group, by far the largest of the family conglomerates that dominate business in South Korea, Asia’s fourth-largest economy. The widely expected decline in the fourth quarter is the second consecutive squeeze on margins for Samsung, which saw operating profits fall 31.39% in the third half year-on-year. Until the second quarter of this year, Samsung, like other companies in the technology sector, benefited greatly from the strong demand for electronic devices – as well as the chips that power them – during the Covid-19 pandemic. . But the global economy now faces multiple challenges, including runaway inflation, rising interest rates and the threat of a full-scale debt crisis.
The group must publish its final annual results at the end of January.