Last year, reports spoke of Samsung having to make tough calls about future device launches owing to continued stresses in global trade and a general fear of a global economic downturn. Despite the manufacturer’s cautious approach, 2022 yielded a 16% decline in operating profits compared to 2021. The South Korean electronics giant is now preparing shareholders and the market for some grim Q1 2023 figures.
In its early guidance, Samsung Electronics expects to report operating profits of 600 billion won in Q1 2023 compared to 14.12 trillion won in the same period last year — that’s a drop of almost 96%. The company puts the blame for this historical decline largely on its chip division, which is typically responsible for just over half of revenues in any given period.
Bloomberg reports that Samsung will scale back production of new chipsets to a “meaningful level” in order to focus on selling out existing inventory. The publication further points out that the firm was initially reluctant to take this call, mainly because of its eagerness to snatch some of the market share from industry rivals Micron and SK Hynix. But it seems it can’t make the sales it needs to remain competitive. To be fair, Samsung’s rivals in the semiconductor industry aren’t exempt from the economy’s tightening grip, either.
One consolation for Samsung is that its smartphone division may have helped cut down on those losses, the full depth of which will be laid out in greater detail during the company’s quarterly earnings call later this month.
Barring any statistical errors, Samsung Electronics will be looking at its worst quarterly performance since 2009, as Ars Technica notes. This is right around the time when the manufacturer started making Android phones — starting with the Galaxy I7500 in 2009, which was succeeded by the first-generation Galaxy S flagship a year later.
Industry researchers cited by Electronics Weekly have predicted a weak Q1 for all major chipmakers. Meanwhile, market analysts at Semiconductor Intelligence have forecast a 12% decline in the industry throughout 2023. This is based on the assumption that the industry will begin its slow recovery in Q2 2023 and continue building on it going into the second half of the year. Consequently, SI is betting on a 5-10% growth in the semiconductor business next year, so even if the chip business is going through a rough patch right now, manufacturers will be eagerly looking forward to the recovery process predicted for later this year.
