The South Korean company's October-December operating profit is expected to have decreased by 69% to KRW 4.3tn ($3.37bn) from KRW 13.87tn the previous year. This is Samsung's lowest quarterly profit since Q3 2014 and falls short of the KRW 5.9tn Refinitiv SmartEstimate. Quarterly revenue is also expected to have dropped 9% from the previous year to KRW 70tn.
Samsung's Struggling Businesses
All of Samsung's businesses have suffered, with chips and mobile being particularly hard. Rising global interest rates and the cost of living have reduced demand for the smartphones and other devices that Samsung produces and the semiconductors it supplies to competitors such as Apple. The mobile business saw a decline in profits in Q4 due to weak demand resulting from prolonged macroeconomic issues and declining smartphone sales and revenue.
The Q4 drop in demand affected the memory chip business, which was greater than expected as customers adjusted their inventories to tighten their finances. Memory chip prices fell by mid-20% during the quarter, and high-end phones such as foldable did not sell as well as expected. Production delays also impacted Samsung's display business at Apple's biggest iPhone factory in China during the quarter.
Q1 Profits Expected to Decline Further
Three analysts have predicted that Samsung's profits will drop again in Q1, with a likely operating loss for the chips business as a glut leads to a further drop in memory chip prices. Samsung's shares rose 1.4% on Friday, despite the disappointing earnings results, as investors hope that the company will reduce production in the same way as Micron and SK Hynix. Samsung stated in October that it did not expect significant changes to its 2023 investments. Still, analysts believe the company could organically adjust its investment by delaying the introduction of equipment or using other methods.