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Samsung has had a relatively tough year, one that has seeped into its stock performance.
South Korean multinational tech giant Samsung Electronics Co Ltd (KRX: 005930) is set to report a significant slump in its fourth quarter (Q4) operating profit amid a broader plunge in the global economy. According to a Reuters report, citing a Refinitiv SmartEstimate from 21 analysts, the company’s operating profit is bound to fall to 5.9 trillion won ($4.62 billion).
Samsung is set to release the preliminary report on Friday while the full report is billed for later this month. Should the analyst’s estimates come through, it will come off as the worst quarterly performance for the company since the third quarter of 2016. Amid the slow recovery from the COVID-19 pandemic in 2021, the company recorded an operating profit of 13.87 trillion won within the same quarter.
“The main reason for the performance… is a sharp drop in demand. Both shipments and prices of chips and smartphones are expected to fall short of previous expectations,” said Kim Roko, an analyst at Hana Financial Investment.
The slumped revenue expectation from Samsung showcases the frailty in the semiconductor industry which has taken quite a beating as consumer tapers down on spending for luxury phones. The prices of the DRAM memory chips which are the most important for use in laptops and PCs dropped 40% on a year-on-year basis.
Drawing on data from TrendForce, prices of NAND Flash chips used in data storage also fell by 14% year-on-year.
These drops were reflected in the reduced handset shipments which came in at 63 million for the quarter. Of these numbers, 62 million were smartphones as detailed by Counterpoint. The mobile phone shipment also directly contrasts with the 72 million handsets that Samsung sold out in the fourth quarter of 2021.
Samsung to Sustain Investment Despite Reduced Operating Profit
The South Korean giant, ranked as the fourth largest publicly traded company in Asia, is set to continue its projected investment in its business segments this year.
The company chose to maintain this strategy with the understanding that its investments at this period of market low can help it secure a significant market share. This it hopes will pay off when the broader financial ecosystem recovers.
Samsung’s top rivals including SK Hynix Inc (KRX: 000660) and Micron Technology Inc (NASDAQ: MU) have revealed plans to halt their investments until at least the second half of this year. Rather than trail this path, Samsung is not reducing the earmarked 128.82 trillion won ($100.83 billion) it plans to spend on research and development this year as it unveiled back in October 2022.
Samsung has had a relatively tough year, one that has seeped into its stock performance. While its shares are currently trading at 58,200 won, up 0.69%, it has fallen as much as 29% in the year-to-date period.