South Korean tech behemoth, Samsung Electronics Co. Ltd., may witness a 25% plunge in its third-quarter profit, owing to the global economic downturn that has led to a slump in demand for consumer tech.
With inflation on the rise across the world, central banks have been aggressively increasing interest rates, which has further led to growing fears of a recession, especially with the ongoing Russia-Ukraine conflict.
This has resulted in consumers, as well as business tightening their spending.
Samsung’s operating profit is likely to come at ₩11.8 trillion ($8.4 billion) in the third quarter, down from ₩15.82 trillion ($11 billion) last year, as per the estimate by Refinitiv.
Greg Roh, Head of Research, Hyundai Motor Securities, stated that with Samsung being the top global memory chipmaker, as well as the top company in mobile OLED displays and TV, along with smartphone shipments, it is highly sensitive to the economy as its profits are easily related to the demand.
This would be the first decline in the group’s profit since the first quarter of 2020, during the onset of the pandemic, and the lowest recorded figure since the first quarter of 2021.
As per average estimates, Samsung’s chip business might also see a one-third fall in operating profit, to ₩6.8 trillion ($4 billion).
According to Trendforce data, the price of DRAM memory chips which are widely used in PCs and smartphones, fell 14% in the quarter while the price of NAND flash chips utilized in data storage fell 8%.
Samsung’s shares tumbled around 30% this year, while the Philadelphia Semiconductor index declined 37%.
Its mobile business is also projected to register around a 17% slump to ₩2.8 trillion ($2 billion), although the company’s average selling price rose with the launch of its new high-end foldable smartphone.
According to analyst Kim Yang-jae at Daol Investment & Securities, Samsung’s smartphone shipments are expected to drop 11% on-year to around 62.6 million smartphones as distribution channels cut back on orders.
Micron Technology, a major chipmaker, also warned of a tougher future and cut down investments for next year.
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