2023-04-27 01:06:22
(Seoul) Samsung Electronics on Thursday reported a plunge in profits of more than 86% in the 1is quarter of 2023, the lowest in 14 years, citing the global economic slowdown which has dealt a blow to sales of chips and electronics.
The South Korean tech giant reported that its operating profits for the January-March period fell 9.75 trillion won (C$9.9 billion) from the same period a year earlier.
They stood at 1,570 billion won (1.6 billion CAN), against 11,320 billion over the same period last year (11.6 billion CAN).
Samsung Electronics’ net operating income plunged 95% from a year ago to 640 billion won (CAN645 million).
Sales fell 18% over the period to 63.75 trillion won ($64 billion), according to the company’s statement.
The company cited a drop in demand for microchips, which usually account for half of its profits, as well as a drop in their price.
Samsung’s chip arm suffered losses of 4.58 trillion won (C$4.7 billion), its first net loss since 2009, when the world was just emerging from the 2008 financial crisis.
The tech giant, however, expects a “gradual recovery” in demand for semiconductors in the second half of the year, due to inventory declines at its customers and their needs for adjustments.
Samsung Electronics is the flagship of the Samsung Group and by far its largest subsidiary.
South Korean chipmakers, led by Samsung, had posted record profits in recent years, fueled by soaring prices, but a slowing global economy has put a damper on the sector.
Initially supported by electronics purchases during the pandemic, it then slowed down, affected in particular by inflation and the rise in interest rates.
Also in April, Samsung announced it would cut memory chip production “significantly” to tackle oversupply.
Smartphone effect
Samsung’s “active” efforts in this direction have been received “positively”, given the importance of the South Korean giant, which weighs on demand and influences general market sentiment, note experts from Eugene Investment & Futures in a report.
“Even if the pace of demand recovery remains slow, the semiconductor industry is likely to pick up again in the second half of the year if cooperation among chipmakers on production cuts is good,” the document said.
In the meantime, analysts are predicting an even more difficult April-July period and it is possible that Samsung will experience its first net losses since 2008 during these few months.
“We can’t rule out the possibility that Samsung will go into the red when the effect of new smartphones subsides,” Samsung Securities analyst Hwang Min-seong told Yonhap.
The new Galaxy S23 range has indeed achieved “strong sales”, writes Samsung in the press release published on Thursday.
The economic situation did not seem to cool the technology giant, however, which revealed in March a massive investment plan of 227 billion dollars (309 billion CAN) over twenty years, for the construction of the largest chip factory. in Yongin, south of Seoul.
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