Samsung braces for biggest profit slump in years as consumer tech demand dries up
Samsung Electronics could be swallowing its biggest profit slump in nearly three years in the third quarter, as a global economic crunch weighs on demand for consumer tech.
The Korean technology giant may have had its profit dwindle by 25 per cent to $8.3bn (£7.3bn) in the three months to September, according to analysis by Refinitiv SmartEstimate.
It would be the company’s first profit drop since the first quarter of 2020, just weeks prior to a lockdown-induced explosion in demand for consumer electronics.
In April, Samsung expected its highest first-quarter profit since 2018, which was supported by brisk smartphone sales and the demand for the microchips inside them, over the three-month period.
At the time, Refinitiv forecast a profit of 13.3 trillion won over the quarter, well above market expectations. Samsung instead booked 14.1 trillion won, or $11.6bn (£10.2bn).
The boom in consumer electronics over the pandemic, as well as the rising popularity of electric vehicles, has seen the demand for chips, or semiconductors, spike rapidly.
Just days ago, the company announced that it intends to double its production capacity for advanced chips by 2027, as the world goes continues to wrestle with a tight supply.
The Korean chipmaker is looking to further capitalise on the strong demand for computer chips, which are used in most of today’s technology.
However, the global economic downturn risks upending this trend, as consumers look to trim excess spending, which could further bruise Samsung as one of the world’s largest chip makers.
Analysts are anticipating this shift to already be in full swing in Samsungs’ latest results, which are expected to be published later this month.
Operating profit for Samsung’s chip business is likely to have fallen by nearly a third, around seven estimates showed.
Co-CEO Kyung Kye-hyun, who heads Samsung’s semiconductors unit, last month issued a warning that the chips industry is taking a turn for the worst.
“The second half of this year looks bad, and as of now, next year doesn’t really seem to show a clear momentum for much improvement,” he told reporters at the time.