Investing.com-- Samsung (LON:0593xq) Electronics (KS:005930) said on Tuesday that its fourth-quarter operating profit likely fell by about 35%, as a sluggish recovery in demand for the firm’s key memory and smartphone chips dented revenue.
Samsung’s operating profit in the three months to Dec 31 likely fell to 2.8 trillion won ($2.1 billion) from 3.7 trillion won a year ago. Revenue fell to 67.40 trillion won from 70.46 trillion won a year ago, while also missing Investing.com estimates of 70.1 trillion won.
The South Korean conglomerate will release a full earnings report on Jan 31.
But Tuesday’s results show that the company is still grappling with a sharp slowdown in chip demand over the past two years. A bulk of this was driven by slowing demand for consumer electronics, as rising interest rates and high inflation across most of the globe saw consumers drastically scale back discretionary spending on electronics.
Apple Inc (NASDAQ:AAPL), for instance, which is a key buyer of memory chips, processors and smartphone displays from Samsung, saw its iPhone sales in China decline for the first three quarters of 2023.
Weakening iPhone sales are likely to herald a similar trend for Samsung’s own smartphone offerings, the Galaxy and foldables ranges.
Corporate investment in tech infrastructure slowed substantially over the past two years, which in turn dented demand for memory chips used in network infrastructure.
The weak earnings also indicated that an artificial intelligence-driven rebound in demand for chips remained weak. The firm had in late-2023 forecast an eventual pick-up in demand on the back of increased interest in AI, which has greatly benefited peers such as NVIDIA Corporation (NASDAQ:NVDA).
But while Nvidia makes specialized chips for running the large language models powering programs such as ChatGPT, Samsung faces stiff competition from rivals such as SK Hynix Inc (KS:000660) and U.S.-based Micron Technology Inc (NASDAQ:MU) in selling high-density memory chips, which are geared towards AI development.
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