The South Korean tech giant blamed weak demand for memory chips for a sharp drop in profits.
Samsung Electronics is forecasting its worst fourth-quarter profit in eight years as global demand for memory chips and smartphones plummets.
Profits fell an estimated 69% to 4.3 trillion won ($3.4 billion) in the October-December period, the South Korean tech giant said on Friday.
Weaker demand for memory chips was “bigger than expected as customers adjust inventories … to further tighten finances, as concerns over deteriorating consumer confidence lead to [by] Global interest rates remain high and the economic outlook is weak,” Samsung said in a statement.
The preliminary results were well below expectations, showing Samsung’s smallest quarterly profit since the third quarter of 2014.
Dismal profit forecasts from the world’s largest maker of memory chips, smartphones and televisions — a bellwether for global consumer demand — set the tone for weak quarterly results from other technology companies.
“All of Samsung’s businesses are going through tough times, but the chip and mobile businesses are especially so,” said Lee Min-hee, an analyst at BNK Securities.
Rising global interest rates and the cost of living have dampened demand for Samsung’s smartphones and the semiconductors it supplies to rivals like Apple.
“Prices of memory chips fell by about 20% this quarter, and sales of high-end phones such as foldable phones were not good,” Lee said, adding that Samsung’s display business was hurt by customer Apple’s production delays around the world. The largest iPhone factory in China this quarter.
Three analysts said they expect Samsung’s profit to plunge again in the current quarter and the chip business could post an operating loss as oversupply drives memory chip prices down further.
Samsung had said in October that it did not expect much change in its 2023 investments.
Samsung has a history of not announcing production cuts in memory chips, but can adjust investments organically by delaying the introduction of equipment or otherwise, analysts said.