Samsung’s quarterly profit hits 8-year low on weak demand for memory chips, smartphones businessroundups.org

Samsung Electronics’ operating profit plunged 69% to $3.4 billion in the quarter ended December to its lowest point in eight years, according to preliminary estimates, as global demand for memory chips and smartphones declines due to high inflation and slowing growth. economy.

“Amid ongoing external uncertainties, including a possible global economic downturn, total revenues fell sharply quarter on quarter as we saw a significant decline in memory business results driven by weak demand and weaker smartphone sales,” the company said in a statement. statement.

The memory chip maker and smartphone maker saw sales of 70 trillion won ($55 billion) in the quarter, down about 8.6% from the same period a year ago.

The sharp decline in demand for memory chips, including DRAM and NAND, used in gadgets and data centers has prompted manufacturers and vendors to lower their price, the report said. TrendForce.

For the memory business, the drop in demand in the fourth quarter was larger than expected as customers adjusted inventories in an effort to further tighten finances amid concerns about deteriorating consumer confidence. “Profits from the mobile experience business fell as smartphone sales and revenues fell due to weak demand due to long-standing macro issues.”

Many chip firms including micron and SK Hynix, intend to reduce their capital expenditures and inventories this year. Samsung has previously said it has no plans to lower its capex.

Geopolitical risk is another concern for semiconductor companies embroiled in the tech war between the US and China. Last October, the US enacted new export controls requiring companies to obtain licenses to sell semiconductor chips for supercomputers and artificial intelligence to Chinese companies.

Samsung Reportedly received a one-year exemption from the US government to continue ordering US chip manufacturing equipment from factories in China, such as the NAND flash memory chip factory in Xi’an and a chip packaging factory in Suzhou. Despite the exemption to keep the facilities in China, there is always a risk that the US restriction will have major consequences for chip companies with customers in China.

South Korea said earlier this week that it plans to increase tax breaks for semiconductor companies in an effort to support Korean chip companies and bolster the country’s critical industry. The move comes after Samsung and SK Hynix paid the highest corporate taxes in 2021 among other top 100 global chip makers, including TSMC, Intel and SMIC.

South Korea’s big chip conglomerates will benefit from a 15% tax cut, up from the planned 8%, on investments in manufacturing facilities; According to the South Korean Ministry of Finance, small and medium-sized semiconductor companies will receive a tax break of no less than 25%, compared to 16%.

The tech giant will release a full fourth-quarter profit and loss statement, including net profit, at the end of this month and provide more details.