Samsung profits drops as demand slows

Samsung

Image Source: Daily Pioneer

Samsung anticipates a 69% reduction in profits for the last three months of 2022, the lowest in eight years.

The world’s largest manufacturer of memory chips, smartphones, and televisions stated its operational profit for the quarter will be around 4.3 trillion won ($3.4 billion; £2.8 billion).

It comes as the price of memory chips and demand for electronic devices plummet as the global economy slows.

Consumers have been cutting back on spending in recent months, which has harmed technological behemoths around the world.

It was Samsung’s lowest quarterly profit since 2014, and analysts had predicted a profit of roughly 5.9 trillion won.

According to the South Korean corporation, the amount of orders for computer chips declined more than predicted since customers were clearing out their stock of these critical elements for digital gadgets.

“For the memory business, the drop in demand in the fourth quarter was bigger than expected because customers changed their stockpiles to save more money,” Samsung said in a statement.

“Demand for smartphones has been low because of long-lasting macro issues,” the report said.

On January 31, Samsung plans to release its full financial report.

It’s the latest big tech company to talk about how the weak global economy is hurting its business.

After the pandemic, sales also slowed down when people at home spent a lot of money online.

Thousands of jobs are being lost in the technology industry worldwide because sales are slowing, and people are getting more worried about an economic downturn.

This week, Amazon said it would cut more than 18,000 jobs, which would be the most in the company’s history, to save money.

Meta said in November that it would lay off 13% of its staff.

The first mass layoffs in the history of the social media company will cause 11,000 of its 87,000 employees worldwide to lose their jobs.

Mark Zuckerberg, the CEO of Meta, said that the cuts were “the hardest changes we’ve ever made in the history of Meta.”

The news came after Twitter fired a lot of people. When billionaire Elon Musk took over the company in October, about half the staff was let go.

Samsung expects a 32% drop in profits

In October, Samsung, a big tech company, said that its profits would drop by 32% because fewer people are buying electronic devices and the memory chips that power them. This is because the world economy is slowing down.

The South Korean company thought its operating profit for the last quarter was about 10.8 trillion won ($7.6 billion; £6.9 billion).

Advanced Micro Devices (AMD), based in the US, also said that a drop in computer sales hurt it.

People are buying less because the cost of living is going up.

Samsung’s profits from making microprocessors went down when the price of memory chips fell worldwide because fewer people were buying consumer electronics.

Estimates for the three months ending in September show that Samsung’s profits fell from the same time last year for the first time in almost three years.

Also, AMD’s revenue estimates for the third quarter were about $1 billion (£895.6 million) less than they had before, showing that the drop in chip demand could be much worse than expected.

In after-hours trading in New York, AMD’s stock dropped by 4.5%.

People are less likely to buy electronics because of rising prices, higher interest rates, and the effects of Russia’s invasion of Ukraine.

This has caused companies that buy memory chips, like those that make phones and computers, to buy less as they use up what they already have.

Analysts in the technology industry think that memory chip prices will continue to fall over the next three months as sales of smartphones continue to drop. They think demand will rise again at the beginning of next year.

The role of the US

In August, US President Joe Biden signed a law that will give $280 billion (£232 billion) to high-tech manufacturing and scientific research. This was done because people were worried that the US was falling behind China in technology.

There will be tax breaks for companies that build factories in the US to make computer chips.

Read Also: Tesla delivered 1.3 million vehicles last year 

The US makes about 10% of the world’s semiconductors, which are used in everything from cars to cell phones. In 1990, the US made nearly 40% of the world’s semiconductors.

The Chinese Embassy in Washington was against the semiconductor bill because it reminded them of a “Cold War mentality.”

Some US chipmakers are already feeling the effects of the crackdown on selling US technology to China by the US government. For example, US officials told Nvidia and AMD to stop selling chips for artificial intelligence to China earlier this month.

So, should people be concerned about employment losses in the tech industry?

Many of the tech CEOs who made the announcements claimed that it was because they hired too many people during the pandemic, when more things moved online and business surged.

Higher loan rates and a severe decline in the US stock market have made it difficult for smaller enterprises to obtain financing.

Furthermore, the significant losses suffered by certain enterprises as a result of the cryptocurrency market’s collapse have not helped.

Opinions expressed by San Francisco contributors are their own.

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