Seoul, Jan 6 (SocialNews.XYZ) Samsung Electronics said on Friday its fourth-quarter operating profit likely plunged 69 per cent from a year earlier due to sliding memory chip prices as an economic slowdown pummelled demand for IT gadgets and servers.
The world's largest memory chip and smartphone maker estimated its October-December operating profit at 4.3 trillion won ($3.4 billion), down from 13.87 trillion won a year ago.
In an earnings shock, Samsung reported a quarterly operating income of less than 5 trillion won for the first time in eight years after posting 4.06 trillion won for the third quarter of 2014, reports Yonhap news agency.
"With external business environments set to remain uncertain, chip sales plummeted due to lower demand from server clients, data centres and handset makers," Samsung Electronics said in a statement.
Chip suppliers, including Samsung Electronics, SK hynix Inc. and Micron Technology, Inc., readjusted their inventories during the fourth quarter, further driving down chip prices, it said.
Smartphone and home appliance sales also declined due to decreased consumer spending amid soaring interest rates and high inflation, Samsung said.
Adding to demand woes, the US government's sanctions on some semiconductor exports to China resulted in lower demand from Samsung's key clients. Apple, a key customer of Samsung's displays and memory chips, suffered production delays at its iPhone plant in China.
Sales likely fell 8.6 per cent on-year to 70 trillion won in the December quarter from 76.57 trillion won a year earlier due to "weak demand resulting from extended macro issues," the company said.
Samsung said it had no immediate plans to cut memory chip production in October. But the company is not likely to make an aggressive investment in memory output given the bigger-than-expected chip price declines, analysts said.
"Samsung is expected to cut its planned memory-related capital expenditure by 15 percent this year as the company looks set to report a loss in its memory chip business during the first half in 14 years since the first quarter of 2009, Jeff Kim, an analyst at KB Securities Co., said.
For the whole of 2022, its operating profit likely fell 16 per cent to 43.37 trillion won from 51.63 trillion won the previous year.
Samsung is due to release its final earnings report on January 31.
Source: IANS
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