Samsung Q3 profit plunges 31% due to chip demand economic crisis.
The top memory chip and smartphone manufacturer Samsung in the world claimed that despite economic headwinds, Chip Demand for its semiconductors may rebound later in the next year as new data centers and computers need more memory.
This was noticeably more optimistic than its smaller rival SK Hynix (000660. KS), which on Wednesday cut expenditure by more than 50% and warned of an “exceptional downturn” in the demand for memory chips.
Samsung’s (005930. KS) operating profit fell to 10.85 trillion won ($7.7 billion) in the July-September quarter, down from 15.8 trillion won the previous year, the company‘s first year-on-year drop in nearly three years.
This was consistent with Samsung’s earlier estimate of 10.8 trillion won. Revenue increased 4% year on year to 76.8 trillion won.
Profit in its chip business dropped to 5.12 trillion won from 10.07 trillion won the previous year.
Although Samsung’s fourth-quarter earnings are expected to fall further as memory chip prices continue to fall, analysts believe the company will be able to defend profits better than peers due to economies of scale.
According to Daishin Securities analyst Wi Min-bok, Samsung is expected to keep capital expenditure cuts to a minimum in 2023 versus 2022 – at around 5% for memory chips – to continue its migration into more advanced manufacturing, which will initially curtail supplies of certain chips due to the new production process.
This contrasts with rivals SK Hynix and Micron Technology’s (MU.O) plans to reduce investment by more than 30% next year.
Samsung’s mobile business profit fell slightly to 3.24 trillion won from 3.36 trillion won a year ago, as a market downturn was offset by stronger demand for high-end smartphones and newly launched wearables.
