Samsung’s profit nosedives 70% in Q4 2022 due to low chip, smartphone sales

Samsung has tough times ahead, similar to many other consumer electronic firms, including Apple. The South Korean firm announced its earnings guidance for Q4 2022, and according to the company’s internal estimates, its operating profit would be around KRW 4.3 trillion (around $3.37 billion) from total revenue of around KRW 70 trillion (around $55 billion).

The company’s Q4 2022 earnings estimates align with what analysts had predicted a few days ago. It’s a 9% drop in revenue and a whopping 69% fall in operating profit compared to Q4 2021. Its operating profit is at an eight-year low for Samsung. These weak numbers are a result of various factors, including low sales of semiconductor chips and smartphones across the world, which are in turn caused by the global economic downturn.

Samsung’s latest earnings estimate also shows a 50% profit drop compared to Q3 2022. The company said that it saw a significant drop in earnings from its memory chip business due to lackluster demand and the current geopolitical situation. The sales of chips were lower than Samsung’s estimation as its clients reduced inventories and tightened their finances. The average prices of memory chips also fell, leading to lower profits. Samsung’s memory chip business will likely see an operating loss for the first time in nearly ten years.

Weak smartphone sales are bothering not just Samsung, but also all other smartphone brands, including Apple and Xiaomi. In fact, some high-level executives from Xiaomi had to step down as a response to the company’s weak business. Analysts expect these weak economic conditions to continue until at least the end of this year.

Things could get a bit rosy in 2024 when sales of smartphones and other home appliances are expected to rise. In 2024, Samsung is expected to launch the Galaxy S24 and the sixth generation of its Galaxy Z Flip and Galaxy Z Fold smartphones.