Samsung's Third-Quarter Profit Plunges Amid Chip Market Woes
Memory chips are a key moneymaker for the electronics giant, but oversupply in the market is leading to significantly lower prices.
Samsung unveiled the Galaxy Z Fold 4 and Galaxy Z Flip 4, the latest iterations of its foldable phones, in August.
Samsung's quarterly profit declined in the third quarter for the first time in nearly three years as economic uncertainty continues to sap demand for PCs and phones, as well as the chips that power them.
The Korea-based company said Wednesday that its operating profit for the three-month period ended Sept. 30 came in at 10.85 trillion won ($7.65 billion), a drop of more than 31% compared with the same time period last year. The decline comes a year after the company recorded the second highest operating profit in its history. Revenue increased nearly 4% to 76.78 trillion won ($54.1 billion).
Samsung is perhaps best known for its phones and TVs, but the electronics giant also dominates the market for memory chips -- a key cash driver for the company. And the memory market essentially collapsed in the second half of 2022 due to oversupply.
The company's semiconductor business reported sales of 23 trillion won in the third quarter, a 14% decrease year over year, as the effects of high inflation, rising interest rates and geopolitical tension hurt consumer spending.
Samsung executives have had a pessimistic outlook for the chip market for months and have warned that relief may not come anytime soon.
"The second half of this year looks bad, and as of now, next year doesn't really seem to show a clear momentum for much improvement," Kyung Kye-hyun, who heads Samsung's semiconductors unit and serves as the company's co-CEO, said at a media briefing in September, according to The Wall Street Journal.
Prices for NAND flash memory, widely used in portable consumer devices, are expected to drop 15% to 20% in the fourth quarter, according to market researcher TrendForce. Prices for DRAM chips, used in smartphones and PCs, are expected to suffer a similar decline.
Economic uncertainty among consumers also hurt profits in the company's mobile division, which saw a 13% increase year over year, driven by a new lineup of smartphones in late August, including the Galaxy Z Fold 4 and the Galaxy Z Flip 4. However, the overall smartphone market is expected to retreat 9% in 2022 year over year, analyst firm Canalys reported earlier this month.