Samsung profit plunges as memory chip crash eats into earnings
SAMSUNG Electronics’s quarterly profit tumbled, hurt by a sharp drop in demand for semiconductors as consumers spent less on electronic gadgets.
Profit at Samsung’s chip segment plunged more than 90 per cent to 270 billion won (S$288 million) in the three months ended December, as customers continued to work through piles of inventories, the company said. Operating income was 4.3 trillion won, missing the average estimate by analysts of 5.8 trillion won.
Net income was a better-than-expected 23.5 trillion won, thanks to a one-time item from a local tax law change.
South Korea’s largest company has been struggling with a historic slump in the price of memory, as consumers cut back on purchases of gadgets amid soaring interest rates and inflation. Inventory has piled up, forcing double-digit price slides that are deepening losses.
Memory pricing will likely continue to decline during the first half of 2023, Goldman Sachs analyst Giuni Lee said in a note to investors ahead of Tuesday’s (Jan 31) announcement. “We expect the company to be in red for both Dram and Nand starting in the first quarter of 2023.”
The industry is suffering from a sharp drop in semiconductor demand due to the war in Ukraine, historic inflation and restrictions on chip exports to China, right on the heels of one of the industry’s biggest capacity ramp-ups to meet pandemic demand.
The world’s largest memory chipmaker, which supplies displays and chips used in Apple’s iPhones, is under pressure to shift gears and lower output and capex.
US memory maker Micron Technology has said that it will cut spending for new plants and equipment as well as slash output. South Korean chipmaker SK Hynix has also scaled back investments and output, while Japan’s Kioxia Holdings has said it was cutting output by 30 per cent. Kioxia, which makes Nand, is in merger talks with US production partner Western Digital, Bloomberg News reported.
Samsung’s earnings come after grim forecasts from other corners of the tech sector. Intel said that it is bracing for one of its worst quarters in history, while Microsoft has said it’s cutting its workforce by 10,000, even as its profit beat analyst estimates. BLOOMBERG
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