Samsung has announced its earnings estimates for Q1 2023. The company expects its operating profit to nosedive by 96% compared to Q1 2022 as the demand for semiconductor chips has waned in the past few months. Moreover, consumers have been buying fewer home appliances as there is a fear of a global economic recession.
The South Korean tech giant estimates its operating profit for Q1 2023 to be around KRW 600 billion (around $454.9 million), which is a huge drop compared to KRW 14.12 trillion (around $10.7 billion) that it achieved in Q1 2022. Samsung’s revenue also fell to KRW 63 trillion (around $47.77 billion), a 19% drop compared to KRW 77.78 trillion (around $58.99). The company hasn’t revealed its net profit yet, and its final earnings figures will be announced later this month.
Over the past few years, Samsung’s Device Solutions business (overseen by the Samsung Semiconductor division), which makes semiconductor chips, has been its most profitable arm. However, during Q1 2023, it saw losses of around KRW 4 trillion (around $3.03 billion). This is the semiconductor division’s first loss in the past 14 years. This is due to a sharp drop in demand for semiconductor chips like SSD and DRAM.
Global firms have significantly reduced spending money for buying semiconductor chips for their servers and cloud infrastructure. However, Samsung continued to manufacture chips, which led to a surplus inventory over the past few months. And it isn’t just Samsung affected by the fall in chip demand. Rivals Micron and SK Hynix also reported heavy losses.
The last time Samsung’s semiconductor business saw such a loss was in Q1 2009, when the world was recovering from the 2008 financial crisis. The South Korean firm said today in its regulatory filing that it is adjusting the output of semiconductor chips to a “meaningful level” to resolve unsold inventory and stop the falling prices of memory chips. The company expects the global chip market to drop 6% to $563 billion and expects tough times to continue for the rest of the year.
Samsung has lately seen lowering smartphone sales and profits. However, during Q1 2023, the company’s smartphones did really well and came to the company’s rescue, stopping it from reporting an overall operating loss. Samsung MX (Mobile Experience), the company’s smartphone division, reportedly earned profits of around KRW 3.3 trillion (around $2.5 billion). This helped Samsung offset its losses from the semiconductor chip division.
The Galaxy S23 series sold really well worldwide. In all the important markets worldwide, including Europe, India, Korea, and North America, the Galaxy S23 series outsold the Galaxy S22 by at least 1.4 times. This is even better when you consider that the global smartphone market has dropped significantly over the past couple of quarters, and all the Chinese firms reported a sharp drop in their sales compared to last year. This shows how strong Samsung’s smartphone division’s fundamentals are.
Samsung Display, the company’s arm that manufactures display panels for TVs and mobile devices, reportedly had a profit of around KRW 800 billion (around $606 million). This could be due to strong sales of mobile OLED panels to Apple and Samsung MX. (Sammobile)