The overall slump in the South Korean company’s quarterly profit is a reflection of the combined drop across its business segment.
South Korean multinational electronics corporation and tech giant Samsung Electronics Co Ltd (KRX: 005930) is feeling the pangs of the current economic downturn as July to September and could see a significant cut in profit. As reported by the Economic Times, citing a Refinitiv SmartEstimate from 22 analysts, the company’s operating profit could plunge to 11.8 trillion won or $8.3 billion.
While the firm is billed to give its earnings call tomorrow at 8.40 local time on Friday (2340 GMT on Thursday), the figures are presented as the first profit decline for the company since the pre-pandemic quarters. Besides this decline, the operating profits also come off as the slowest growth since the first quarter of 2021.
The growing inflation level this year and the monetary response of Central Banks have made many spenders stay on the side of caution when it comes to spending in general. The current economic climate has stirred up the fears of inflation across the board, and without anyone allaying these fears, consumers have stayed more prudent, especially for high-end phones.
The transition from the willingness to spend as in the COVID-19 pandemic days to hoarding spending is telling on Samsung which comes off as one of the biggest beneficiaries of the pandemic.
“Being the world’s top memory chip maker, top in TV and mobile OLED displays, and top in smartphone shipments, Samsung is highly sensitive to the economy, with profits easily linked to demand,” said Greg Roh, head of research at Hyundai Motor Securities.
Kim Yang-jae, an analyst at Daol Investment & Securities also estimates that the company’s shipment was impacted by the events in the broader supply chain world. According to Kim, the company must have shipped 62.6 million after its distribution Channels cut orders.
Samsung Profit across Its Business Segments
The overall slump in the South Korean company’s quarterly profit is a reflection of the combined drop across its business segment.
According to data from TrendForce, the prices of Samsung’s DRAM memory chips which are used in smartphones and personal computers dropped by a massive 14%. Also, the powerful NAND Flash chips that are used in data storage were down by 8%.
Ahead of the earnings call, Samsung shares have been on the rise and have topped 0.54% in the past 24 hours. Despite this marginal growth, the shares are down by 30% in the year-to-date period.
Samsung has been innovating significantly to balance out the competition from other top phone makers like Apple Inc (NASDAQ: AAPL). The company launched a higher version of its foldable phones, the Galaxy Z Phones which has raised the average price of its phones across the board. The mobile segment, however, experienced a plunge of 17% according to forecasts with an expected 2.8 trillion won profit.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
