Samsung expects 69% drop in fourth-quarter profit as revenue drops

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Samsung Electronics Co. Ltd. today reported preliminary financial results for the fourth quarter, disclosing that both its profit and revenue declined in the last three months of 2022. 

Samsung estimates that its profit dropped 69% year-over-year, to 4.3 trillion won or about $3.37 billion. The company’s estimate fell significantly short of market expectations. Analysts polled for the Refinitiv consensus expected Samsung to post a fourth-quarter profit of 5.9 trillion won, or about $4.7 billion. 

Samsung also experienced a sales decline during the quarter. The company estimates that its revenue dropped 9% year-over-year, to 70 trillion won or about $56 billion, in the three months through Dec 31. Samsung cited lower demand for its memory chips as one particularly significant contributor to the revenue decline. 

“For the memory business, the decline in fourth-quarter demand was greater than expected as customers adjusted inventories in their effort to further tighten finances,” Samsung said in a statement.

Samsung is the world’s largest maker of flash memory chips. It’s also the leading provider of DRAM chips, with an estimated market share of more than 40%. The company’s memory modules can be found in a variety of devices ranging from smartphones from data center servers.

Last year, Samsung introduced a new memory product dubbed the Memory-Semantic SSD. It’s a flash storage module that uses a built-in DRAM chip to carry out some data read and write operations. According to Samsung, the Memory-Semantic SSD can provide up to 20 times the performance of a standard solid-state drive.

Samsung last year also began mass producing flash chips for smartphones based on the latest UFS 4.0 storage specification. UFS 4.0 enables flash chips to perform sequential data read and write operations twice as fast as the previous version of the specification.

Despite the new products that Samsung launched last year, its memory business is believed to have logged a double-digit sales decline in the fourth quarter. According to CNBC, BNK Investment & Securities estimates that the company’s memory sales “fell in the mid-20%” range during the quarter. 

BNK reportedly also believes that the electronics giant’s foldable devices and other high-end handsets “didn’t sell as well.” Samsung launched two new foldable devices in 2022. The Galaxy Z Flip 4 is a 6.7-inch smartphone that can fold vertically like a flip phone, while the Galaxy Z Fold 4 is a tablet that folds like a book.

CNBC cited three analysts as saying that Samsung’s profit is expected to decline again in the current quarter. Additionally, the analysts reportedly expect the company’s semiconductor business to post an operating loss as a result of reduced demand for memory chips.

Samsung’s semiconductor business makes not only memory chips but also processors. Last June, the company began mass-producing processors using its newest three-nanometer manufacturing technology. The technology facilitates the creation of faster and more power-efficient chips. 

In October, Samsung stated that it was not considering reducing purchases of chip manufacturing equipment this year. More recently, it was reported that the company is adding more production capacity at its largest semiconductor plant. As part of its 2023 investment plan, Samsung reportedly intends to buy at least 10 extreme ultraviolet machines, the most advanced systems on the market for etching transistors into silicon wafers.

Photo: Samsung