Samsung’s next quarter promises to be even worse than Samsung’s previous quarter, which was already at an eight-year low. The company warned investors today that this is a shocking 95.8% year-over-year drop in operating profit in the first quarter of 2023. If those expectations are true, it will be the company’s worst quarter since 2009, which mostly dates back to the pre-smartphone era.
Samsung has no particular explanation for the fall other than a weakening economy and reduced demand for chips. According to preliminary data, the company’s profit for the first quarter of 2023 was only 600 billion won ($450 million), compared with a profit of 14.12 trillion won ($10.7 billion) for the first quarter of 2022.
While phones and TVs are probably Samsung’s biggest consumer products, the company’s near-invisible component business makes up the bulk of Samsung’s profits. Components such as RAM and NAND memory chips are supplied not only with Samsung products, but also with most other phones, laptops, desktops, TVs and other electronics from Samsung competitors. In the DigiTimes breakdown of Samsung’s business for 2022, the memory division makes up 55 percent of profits, mobile devices 22 percent, and displays 11 percent, so Samsung’s earnings basically rise and fall along with the memory business.
Slower demand for chips has led Samsung to stockpile, with Bloomberg and other financial agencies reporting that Samsung will cut chip production while sorting through piles of unsold chips. Other memory manufacturers such as Micron and Hynix are also suffering and have already cut production.
Samsung’s full earnings report will be released later this month.