Samsung Electronics Operating Profit Falls 69% on Lower Tech Demand

The company’s net profit for the last three months of 2022 rose 119.9% ​​to 23.84 trillion won, or roughly $19.4 billion, reflecting a one-time tax gain from a recent change in South Korean tax laws regarding dividends from subsidiaries, Samsung said.

The weakness follows disappointing earnings from other industry peers such as Intel Corp.

which reported a net loss for the October-December quarter last week.

Global demand for tech products by consumers and companies dropped steeply in the second half of 2022, prompting big profit falls at semiconductor firms that had enjoyed a boom at the outset of the pandemic. Memory chips, Samsung’s cash cow business, have seen prices fall significantly as supply has exceeded demand by a large margin.

Samsung’s operating profit for the fourth quarter came to 4.31 trillion won, around $3.5 billion. Revenue for the three-month period fell by roughly 8% from a year ago to 70.5 trillion won.

Samsung’s full-year net profit for 2022 totaled 55.6 trillion won, a 39.5% rise from a year earlier.

Samsung is the world’s largest producer of two major types of memory chips called DRAM, which enables devices to multitask, and NAND flash that provides storage on devices.

Industry analysts expect average contract prices of both types of memory to keep falling through the first half of the year, as demand remains sluggish and inventory levels high amid continued macroeconomic challenges and widening recessionary fears.

Samsung’s semiconductor business led by memory chip sales saw operating profit for the October-December quarter drop by 96.9% from the previous year to 270 billion won, the company said. Semiconductor revenue for the three-month period declined 23.6% from last year to 20.07 trillion won.

The global smartphone industry too is in a slump, prompting profits to sink at Samsung, the world’s largest smartphone maker by shipments. The company’s mobile-and-networks division logged fourth-quarter operating profit of 1.7 trillion won, a 36.1% decline from a year earlier.

Global smartphone shipments during the fourth quarter—typically a strong quarter aligned with the holiday season—declined 18.3% from the prior year to 300.3 million units in the largest-ever decline in a single quarter, according to International Data Corp., a tech- market researcher.

Rising inflation and growing macroeconomic concerns have stunted consumer spending more than expected, weighing down global demand for smartphones, IDC said. This year’s global smartphone shipments are expected to grow by 2.8%, although could be adjusted down further given the grim outlook, according to IDC’s forecasts.

While tough market conditions continue, Samsung is scheduled to launch its new Galaxy S23 smartphone series this week in the industry’s first major launch of this year.

Write to Jiyoung Sohn at [email protected]