Press Release: Samsung announced its earnings estimate for 1Q 2023. According to the company's data, its profits will decrease by up to 96% year-on-year. The reason behind everything is the falling demand for semiconductors and less customer interest in other Samsung products. The company is thus kept afloat only by the sale of new smartphones and other selected devices.
Samsung's operating profits fall 96%
The current crisis is not kind to anyone, not even the tech giants who are gradually feeling its effects. Among them is the South Korean one Samsungwhich according to its estimates, it will report 1% lower profits in 96Q than last year. Specifically, the operating profit should be around USD 454,9 million - last year it was USD 10,7 billion.
Sales shouldn't be much better either, which will drop by roughly 19% year-on-year from USD 58,99 billion to USD 47,77 billion. Samsung will announce the exact results at the end of April. In any case, it is already certain that the declines in profits and sales will be some of the highest in its history.
This is all due to the drop in demand for semiconductors, which hit the Device Solution division the most. The during 1Q 2023 it recorded a loss of around 3,03 billion USD – this is the first and at the same time the highest loss in the last 14 years.
The decline in demand was already visible at the end of last year, when a large number of companies around the world began to limit purchases of semiconductors for their servers and cloud infrastructure.
However, Samsung ignored this trend and continued to mass-produce chips, which is why it currently has overstocked components for which there is no demand. Its competitors Micron and SK Hynix are in a similar situation.
Demand for semiconductors is the lowest since 2008
Samsung's record losses will rank among the highest, and it's unclear when it will be able to erase them completely. Its biggest problem is the already mentioned low demand for semiconductors. She is the lowest since 2009, when the entire industry was slowly recovering from the 2008 financial crisis. History seems to be repeating itself. Even Samsung itself is afraid of this, and that is why it is gradually looking for ways to deal with the whole situation.
In its latest statement, it announced that it is moving to cut semiconductor production in order to sell off its inventory in warehouses and at the same time stop the steep decline in the price of memory chips. The company itself expects that the chip market will decline by about 6% to $563 billion this year. However, the downward trend could continue at the end of this year and the beginning of next year.
Samsung keeps smartphones afloat
The global crisis is gradually taking its toll on Samsung's sales, as customers are less willing to invest in its devices, especially smartphones. Even so, it is one of the company's most profitable divisions. In 1Q 2023, it managed to achieve profits of around 2,5 billion dollars, thereby preventing even higher losses.
Samsung was mainly helped by the release of the new S23 series of smartphones, which succeeded all over the world, including the European, Korean, Indian and American markets. In total, the sale of the series Galaxy The S23 surpassed the sales of the series by 1,4 times Galaxy S22.
Compared to the competition, Samsung is still among the real leaders, whose devices are in demand even in times of global crisis. At the same time, the Samsung Display division, which produces displays for televisions and mobile devices, also recorded smaller successes. So, in short, Samsung still has hope for future growth, even if it has to contend with unfavorable conditions in the semiconductor market.
Source: Finex.cz
