By 
Samsung Electronics’ operating profit has declined by 69% to US$3.4bn over the past three months, from US$11 billion recorded in 2021 due to the global economic slowdown.
Samsung has been grappling with weak demand for memory chips, smartphones and displays as consumers have cut down spending amid soaring interest rates and inflation.This is the company’s worst profit decline since 2014.
Adding to demand woes, Apple Inc., one of Samsung’s biggest customers for displays and memory chips, suffered production delays at its iPhone assembly complex in the Chinese city of Zhengzhou.
The grim preliminary numbers are adding pressure on Samsung, the world’s largest memory chipmaker, to shift gears and lower output and capex, fueling hopes for a turnaround. Samsung shares gained about 1% after swinging between gains and looses at the market open. Rival SK Hynix Inc. also climbed about 1% while Korean chip suppliers jumped.
Samsung has been adamant that it has no plans to cut capex or supply, but fast deterioration in demand and deteriorating profitability means that management might be forced to consider memory production cuts.
While Samsung’s inventory levels suggest a turnaround in the second quarter, a likely cut in memory chip production could mean a turnaround “a bit earlier,” Daniel Yoo, head of global asset allocation at Yuanta Securities Korea, told Bloomberg TV.
After ramping up production to record levels to meet a pandemic-era surge in demand, chipmakers have since had to slash spending on new production and cut costs to cope.
Comments