A new report indicates that Samsung’s quarterly profit is expected to drop by 25%, which will be the company’s first decline in profit for almost 3 years. The current economic uncertainties have finally outgrown the demand for various electronic devices developed by Samsung and the chips that power them.
From the Russian-Ukraine conflict, with no one exactly knowing how that will turn out, the ever-increasing global inflation and the fears of a recession have all significantly discouraged businesses and consumers alike from spending on new devices.
The net result for Samsung, which is the world’s biggest memory chip and smartphone maker, is their operational profit is projected to fall to $8.3 billion in the July-September quarter, according to a Refinitiv SmartEstimate, done by 22 analysts.
“Being the world’s top memory chipmaker, top in TV and mobile OLED displays, and top in smartphone shipments, Samsung is highly sensitive to the economy, with profits easily linked to demand,” explains Greg Roh, the head of research at Hyundai Motor Securities.
This decline in profit would be a first for Samsung, since the first quarter of 2020 at the beginning of the pandemic, and also the lowest level of quarterly profit since the first quarter of 2021.
The analysts note that until this last quarter of 2022, there was a high demand for new devices as people being forced to work from home played a huge part in driving large profit gains for Samsung.
Taking a look at other areas where Samsung has a presence, the prices of DRAM memory chips, used in smartphones and PCs, dropped by 14% in the quarter while the prices for NAND chips, used in data storage saw a decline of 8%
The company’s smartphone business has also not been spared, with profits expected to drop by 17% to 2.8 trillion won($1.9 billion). However, the very high end of the market is expected to see some growth, with the new foldables getting a good reception.
Estimates put the decline in Samsung’s smartphone shipment at around 11% in the quarter compared to the same period a year earlier, where 70 million Samsung smartphones were distributed to different regions of the world.
When the demand for new electronic devices will pick up is hard to tell, especially for the budget and midrange sectors. What is clear, however, is that the last quarter of the year does not look good for Samsung, and other smartphone manufacturers at large, as more people refrain from spending on new products.
