SEOUL – South Korean tech giant Samsung Electronics today said its third-quarter operating profits were down 31.39% year-on-year after a global economic downturn hit demand for consumer electronics.
Earnings in its crucial memory chips division were down, the company said in a statement, adding that “demand for consumer products remained weak”.
Operating profit for July to September 2022 fell to 10 trillion won (RM31.5 billion) down from 15.8 trillion won for the same period last year, the company said.
The results are the company’s first year-on-year decline in profit for nearly three years.
But the company said it had seen an increase in sales, which were up by 3.79% from the same period last year, to 76 trillion won.
The firm is the flagship subsidiary of the giant Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in Asia’s fourth-largest economy, and is crucial to South Korea’s economy.
Until the second quarter of this year, Samsung, along with other tech companies, significantly benefitted from strong demand for electronic devices – as well as chips that power them – during the pandemic.
But the global economy is now facing multiple challenges, including soaring inflation, rising interest rates and a growing threat of a broad debt crisis.
The situation has been exacerbated by Russia’s invasion of Ukraine – which spurred a surge in energy prices and pushed global food prices up – along with China’s adherence to a strict zero-Covid-19 policy.
“In 2023, demand is expected to recover to some extent, but macroeconomic uncertainties are likely to persist,” Samsung Electronics said.
“In the Memory Business, after a dampened first half, demand is expected to rebound centering on servers as data center installations resume,” it added.
Geopolitics
The vast majority of the world’s most advanced microchips are made by just two companies – Samsung and Taiwan’s TSMC – both of which are running at full capacity to alleviate a global shortage.
The supply of memory chips has become an issue of global geopolitical significance recently, with leading governments scrambling to secure advanced chip supplies.
That was demonstrated in May when US President Joe Biden kicked off a South Korea tour by visiting Samsung’s sprawling Pyeongtaek chip plant.
Russia’s invasion of Ukraine has “further spotlighted the need to secure our critical supply chains”, Biden said at the plant, underscoring the importance of bolstering technology partnerships among “close partners who do share our values”.
The US also recently introduced new measures to limit China’s access to high-end semiconductors with military uses, a move that has wiped billions from chip companies’ valuations worldwide. – AFP, October 27, 2022
