Samsung Electronics flags sharp Q4 profit drop on falling demand

Samsung Electronics forecasted a 69 percent drop in operating earnings for the fourth quarter as a result of the severe reduction in demand for smartphones and memory chips brought on by the global recession.

The South Korean IT giant reported that operating profits for the months of October through December likely fell to 4.3 trillion won ($3.4 billion), a sharp reduction from 13.87 trillion won in the prior-year period.

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Samsung said in a statement that its fourth-quarter profits were “far below current market expectations,” attributing the underperformance to macroeconomic problems brought on by central banks hiking interest rates around the world.

Memory chip demand was “less strong than anticipated as customers reduced inventories… to further tighten finances led by concerns over poor consumer sentiment caused [by] sustained high global interest rates and weak economic outlooks,” according to a report.

Due to the situation, the manufacturer of the Galaxy devices “experienced a considerable reduction in the memory business results due to lackluster demand and also worse sales of handsets,” it was said.

For the first time in four years, Samsung released an explanation along with their earnings forecast.

The business is the flagship subsidiary of the enormous Samsung Group, which is by far the largest of the family-controlled conglomerates that rule the fourth-largest economy in Asia and are essential to South Korea’s economy.

With operating earnings declining by 31.39 percent year over year in the third quarter, Samsung is experiencing its second straight quarter of margin pressure as a result of the widely anticipated fourth-quarter decline.

Up until the second quarter of last year, Samsung and other tech firms reaped major rewards from the pandemic’s spike in demand for electronic gadgets and the semiconductors that power them.

But the global economy is currently dealing with a number of issues, such as skyrocketing inflation, rising interest rates, and a mounting prospect of a significant debt crisis.

At the end of this month, the corporation is anticipated to deliver its final earnings report.

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