Samsung reports lowest quarterly profit in 14 years

2023-04-27 03:45:48

By Le Figaro with AFP

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The global economic slowdown has taken a toll on sales of chips and electronic products. FRANCIS MASCARENHAS / REUTERS

The company cited a drop in demand for microchips, which usually account for half of its profits, as well as a drop in their price.

Samsung Electronics on Thursday April 27 announced a plunge in its profits of more than 86% in the 1st quarter of 2023, the lowest in 14 years, citing the global economic slowdown which has dealt a blow to sales of chips and electronic products. The South Korean tech giant reported that its operating profits for the January-March period fell 9.75 trillion won (6.6 billion euros) from the same period a year earlier. They stood at 1.570 billion won (1.06 billion euros), against 11.320 billion over the same period last year (7.7 billion euros).

At the beginning of April, the group said it expected a more pronounced fall, of 95.7% in 1Q. But this drop remains the largest for 14 years. Samsung Electronics’ net operating income plunged 95% compared to last year, to 640 billion won (428 million euros). Sales fell 18% over the period, to 63.750 billion won (42.5 billion euros).

Towards a “gradual recovery”

The company cited a drop in demand for microchips, which usually account for half of its profits, as well as a drop in their price. Samsung’s chip arm suffered losses of 4.58 trillion won (3.1 billion euros), its first net loss since 2009, when the world was just emerging from the financial crisis of 2008. The tech giant, however, expects a “gradual recovery” demand for semiconductors in the second half, due to customer inventory reductions and customer adjustment needs.

Samsung Electronics is the flagship of the Samsung Group and by far its largest subsidiary. South Korean chipmakers, led by Samsung, had posted record profits in recent years, fueled by soaring prices, but the slowing global economy has put a damper on the sector. Initially supported by electronics purchases during the pandemic, it then slowed, affected in particular by inflation and the rise in interest rates. Also in April, Samsung announced that it would cut memory chip production “significantly” to tackle the oversupply problem.