Samsung's quarterly profit is set to fall 58 per cent to its lowest in six years in the wake of the global economic slowdown that has resulted in trimmed-down demand for electronic devices and eclipses the outlook for the memory chip industry, the media has reported.
Smartphone consumers and businesses both have cut down spending and investment in the wake of the high inflation and growing interest rates, smartphone makers and other clients held back memory chip orders, while smartphones sold for less as demand suffered, according to analysts, says a report by news agency Reuters.
Additionally, NAND and DRAM prices have also declined sharply in the fourth quarter due to a lack of demand for the products they eventually go into, such as PCs.
Operating profit for Asia's fourth most valuable listed company likely fell to KRW 5.9 trillion (roughly Rs. 40,000 crore) in the October-December quarter, according to a Refinitiv SmartEstimate from 21 analysts, the Reuters report added.
"The main reason for the performance...is a sharp drop in demand. Both shipments and prices of chips and smartphones are expected to fall short of previous expectations," Kim Roko, Analyst at Hana Financial Investment, was quoted as saying.
According to analysts at Macquarie Research, Samsung is forecast to report fourth-quarter operating profit of 5.5 trillion won, which would be the lowest since the third quarter of 2016. As per Daiwa Capital Markets analysts, operating profit will stand at at 4.9 trillion won, a 65 per cent year-on-year plunge and would be the lowest since the fourth quarter of 2015, says a report by CNBC.
To recall, Samsung recently licensed 5G technology from Chinese tech behemoth Huawei, which was forced to launch its smartphones with the proprietary HarmonyOS operating system after it was banned from accessing the US supply chain due to sanctions imposed on it. Oppo has also licensed key technologies from Huawei.