Samsung reports profits nosedive amid worldwide system shocks

  • Samsung has reported its first profit drop since 2019.
  • South Korea’s largest company saw profits slashed by 32 percent amid worldwide shockers like the Russian invasion of Ukraine.
  • Big tech is facing an industry-wide demand crash for memory chips.

Samsung has reported its first profit drop in three years as the global PC and memory chip market crash continues to weigh heavily on big tech.

The company revealed today that operating profits plummeted 32 percent to $7.7 billion (~R138 billion) for the three months ending in September, Bloomberg reports. Undershooting analysts’ estimates that the tech giant would manage to reach $8.5 billion (~R153 billion).

Samsung’s sales also missed their initial estimates, coming in at $54 billion (~R967 billion). The company will apparently provide a full report on net income and details of the performance of its divisions at the end of the month.

According to internal communications from Samsung’s chip business head Kyung Kyehyun, the company has slashed its guidance for chips sales in the second half of 2022 by 32 percent compared to its forecast in April.

Samsung’s shares dropped by as much as 2 percent in Seoul following the news.

The global memory market has become significantly more brutal in recent weeks, with manufacturers reporting that their inventories are building up and orders are being cut. The demand for PCs and smartphones continues to shrink further than initially expected with major corporations and consumer clients alike spending less on silicon.

Samsung is not weathering this storm alone. Shortly before the company revealed their profits freefall, US processor and graphics chip maker AMD also missed its initial third-quarter sales estimates, which trickled in around $1 billion (~R18 billion) below forecast.

“Macroeconomic conditions drove lower than expected PC demand and a significant inventory correction,” AMD CEO Lisa Su said.

These macroeconomic conditions include system shocks like Russia’s invasion of Ukraine, as well as record inflation and petrol prices worldwide. This has led to PC manufacturers industry-wide reducing orders and rather turning to their remaining stockpiles of chips as consumer sentiment worsens.

“Due to the extremely sluggish demand, customers began to reduce inventory from the end of 2Q22,” said Song Myung-sup, an analyst at HI Investment & Securities.

“With the exception of some big tech companies, clients are slashing their chip orders despite sharp price cuts,” they added.

[Image – Babak Habibi at Unsplash]


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