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SEOUL – South Korean giant Samsung Electronics said Friday it expects operating profit to fall 69 percent year-on-year in the fourth quarter due to lower overall demand for electronics.
The company’s October-December operating income is expected to reach 4.3 trillion won ($3.4 billion), a sharp drop of around 13.9 trillion won year on year.
This could be the company’s worst quarterly decline in earnings since the third quarter of 2014.
Samsung said in a statement that its fourth-quarter earnings were “significantly below current market expectations,” attributable to macroeconomic problems exacerbated by persistently high central bank interest rates around the world.
Weak demand for memory chips was “bigger than expected as customers adjusted inventories (…) to further improve their finances amid concerns about consumer sentiment as global interest rates continue to rise, high prices and a poor economic outlook.
In this context, smartphone maker Galaxy “recorded a significant decline in results in the memory chip sector due to falling smartphone demand and sales,” he added.
For the first time in four years, Samsung has issued a press release detailing its situation alongside earnings forecasts.
The company is the flagship subsidiary of the giant Samsung Group, the largest of the family conglomerates that dominate business in South Korea, Asia’s fourth largest economy.
“Samsung Electronics is extremely important to the South Korean economy,” Kim Dae-jeong of Sejong University told AFP.
“Given today’s announcement, this year is going to be very challenging. Not only Samsung, but the entire Korean economy seems to have to find a good survival strategy for the coming year.”
The widely anticipated fourth-quarter decline is the second straight margin decline for Samsung, whose operating profit fell 31.4% year-over-year in the third half.
Until the second quarter of this year, Samsung, like other tech companies, has largely benefited from high demand for electronic devices and the chips they run on during the Covid-19 pandemic.
But the global economy is now facing multiple challenges, including runaway inflation, rising interest rates and the threat of a full-blown debt crisis.
The group is due to publish its final annual results at the end of January.