Samsung Electronics, the world’s biggest maker of memory chips, TVs, and smartphones, is expected to announce preliminary first-quarter results on Friday that indicate a 92% profit plunge, marking the lowest for any quarter in 14 years.
First-Quarter Results to See Record Fall in Profits
The company’s operating profit is expected to fall to KRW 1.08tn (roughly Rs. 6,769 crore) for the quarter ended March 31. Samsung, a bellwether for global consumption trends, is experiencing a chip prices’ tumble disrupting its growth momentum.
Flagship Smartphones Intend to Offset Plunge
The launch of a new flagship smartphone series, including the Galaxy S23, is expected to support mobile profits, but the chip division is likely to record quarterly losses over KRW 3tn (roughly Rs. 18,903 crore) as memory chip prices fell significantly and inventory values were cut, analysts have said.
Downward Price Movement of Memory and NAND Chip Prices
TrendForce data revealed that prices of DRAM memory chips declined roughly 20% quarter-on-quarter, while NAND flash chip prices dropped by an estimated 10-15%.
Samsung Stays Put on Investment Plans Despite Competitors Cutting Back
Many clients, including data centres, personal computer, and smartphone makers, are holding back on purchasing new chips and using up their inventory, while others are hesitant to make new investments in the highly volatile market.
In contrast, Samsung has seen it as an opportunity to expand its market share lead over competitors to leverage an eventual rebound in demand.
Smartphone Sales See a Decline as Inflation Takes Over
Keywords including inflation, sluggishness of consumer demand for tech devices and rising interest rates have left the mobile business sector of Samsung feeling the heat.
The average of seven analysts has shown that operating profit at Samsung’s mobile business plummeted by 9%, recording KRW 3.46tn in the March quarter. Nonetheless, premium models such as the Galaxy S23 were more resilient, supporting profits as they accounted for around 20% of total sales, IBK Investment & Securities analyst Kim Woon-ho said.
Samsung to Expand Its Operational Funds
As revealed in February, Samsung Electronics has planned to borrow KRW 20tn from Samsung Display to use as operational funds until August 2025. The move is intended to enable continuation of production in the wake of inflation and plummeting prices.
Despite a revenue increase of 2.8% to KRW 63.67tn (roughly Rs. 4,01,138 crore), analysts have described Samsung’s Q1 2023 performance as lacklustre.
The global slowdown conditions caused by the COVID-19 pandemic have impacted the technology sector, with Samsung’s competitors, Micron Technology and SK Hynix, reducing investment plans in response to the chip downturn, expecting it to last for at least the second half of 2023.
The first-quarter earnings guidance demonstrates that Samsung Electronics will require a massive overhaul of its chip-making and smartphone businesses to remain on an upward trajectory.