The upcoming quarter for Samsung, which was already at an eight-year low, is expected to be significantly worse. The operating profit for the first quarter of 2023 will decline shockingly by 95.8% year over year, the company informed investors today. If that forecast comes true, this will be the company’s worst quarter since 2009, when smartphones were still relatively new.
Samsung’s rationale for the decline is limited to the worsening economy and decreased chip demand. According to preliminary figures, the company only made 600 billion won ($450 million) in profit in the first quarter of 2023 as opposed to 10.7 billion won ($14.12 trillion) in Q1 2022.
Samsung’s component business, which includes RAM and NAND storage chips, is responsible for most of the company’s profits, despite being less visible to consumers compared to its phones and TVs. These components are not only used in Samsung’s own products, but also in those of its competitors, such as phones, laptops, desktops, TVs, and other electronics.
According to a breakdown by DigiTimes, the memory division accounts for 55 percent of Samsung’s profits, followed by mobile at 22 percent, and displays at 11 percent. Therefore, Samsung’s profits are largely dependent on the memory business.
However, lowered chip demand has resulted in Samsung’s inventory piling up, prompting the company to cut chip production to sort through its unsold chips. Other memory vendors like Micron and Hynix have also reduced production due to the slump in demand.
Bloomberg and other financial outlets have reported on Samsung’s chip production cuts, indicating the significant impact of the memory market on Samsung’s profits.
