Samsung’s Profit Drops 95%, Worst Quarterly Earnings In 14 Years

Seoul, South Korea:

Samsung Electronics on Thursday reported its worst quarterly earnings in 14 years, blaming slowing shopper spending on electronics and a worldwide microchip glut that hit its core reminiscence enterprise.

The South Korean firm — one of many world’s largest makers of reminiscence chips and smartphones — mentioned in an announcement that working revenue fell 640 billion gained ($478.6 million) — down 95 % from a 12 months earlier.

The corporate’s first-quarter internet revenue fell 86.1 % to 1.57 trillion gained, and gross sales dropped 18 % to 63.75 trillion gained.

The corporate mentioned that “total shopper spending slowed amid the unsure international macroeconomic setting”.

Samsung additionally blamed weakening demand for reminiscence chips — which often generate about half the agency’s earnings — and falling chip costs.

Samsung’s chip division reported 4.58 trillion gained in losses, its first working loss since 2009 — when the world was rising from the 2008 monetary disaster.

It mentioned this was as a consequence of “continued worth declines and an elevated valuation loss … amid weakening sentiment and continued impacts of stock changes by prospects brought on by extended exterior uncertainties,” the corporate mentioned.

Demand for reminiscence was “anticipated to steadily recuperate” within the second half of 2023, “amid projections that buyer stock ranges could have declined.”

The agency is the flagship subsidiary of the large Samsung Group, by far the biggest of the family-controlled conglomerates that dominate enterprise in Asia’s fourth-largest financial system.

The primary-quarter drop is the third consecutive margin squeeze for Samsung, which noticed a 70 % fall in working earnings within the fourth quarter on-year.

Scaling again manufacturing

Korean chipmakers — led by Samsung — have loved document earnings in recent times as costs for his or her merchandise soared, however the international financial slowdown has dealt a blow to reminiscence gross sales.

Demand swelled in the course of the pandemic as shoppers purchased new computer systems and smartphones throughout lockdowns, prompting chip makers to ramp up manufacturing.

However demand rapidly diminished as lockdowns lifted and weakened additional within the face of hovering inflation and rising rates of interest.

Samsung mentioned this month it’ll cut back reminiscence chip manufacturing at a “significant” stage to deal with the oversupply, an uncommon transfer by the agency, which beforehand mentioned it will make solely small changes.

South Korean chip maker SK Hynix and Micron Expertise of america have additionally lowered manufacturing.

Samsung’s “lively” efforts to get out of the stock rut have been “positively evaluated” contemplating its impact on market sentiment and demand for reminiscence chips, mentioned a report launched by Eugene Funding & Futures.

“Even when the tempo of restoration for demand stays sluggish, the semiconductor trade is very prone to recuperate within the second half if cooperation among the many chip makers on manufacturing cuts goes nicely,” it added.

Whereas stable gross sales of its new flagship Galaxy 23 smartphones helped offset deficits within the chip sector within the first quarter, analysts anticipate situations within the April to July interval to worsen and even result in Samsung’s first revenue loss since 2008.

“We can not rule out the opportunity of Samsung swinging to the purple when the impact of recent smartphones diminishes,” Hwang Min-seong, an analyst at Samsung Securities, informed Yonhap information company.

The current drop in earnings has not deterred Samsung from making daring investments — in March, it unveiled plans to contribute $227 billion over the following 20 years to constructing the world’s largest chip centre in Yongin, south of Seoul. 

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