Samsung issues profit warning as microchip market stutters
Samsung has said its operating profit is likely to plummet 35 per cent in the fourth quarter of 2023 as it struggles to get a grip on a microchip market that is still in the lurch.
The South Korean tech giant has forecast a dip to 2.8t South Korean won (£1.7bn) in its October to December quarter, down from the 4.31t won (£25.7bn) in the same period the previous year.
The guidance widely misses the LSEG’s SmartEstimate of 3.7t won (£2.2bn).
Fourth quarter revenue likely fell 4.9 per cent from the same period in 2022 to 67t won (£399bn), the firm also said in its preliminary earnings statement on Tuesday.
Samsung is trying to recover from the ripple effect of last year’s drop in chip prices, a consequence of post-Covid surpluses and as weakened demand for gadgets like smartphones and laptops refuses to pick up.
Shares in Samsung were down 3.55 per cent on Tuesday afternoon.
In its third quarter earnings report, the company said demand for mid and low-priced smartphones “remained sluggish due to influences of the economic downturn and inflation.”
“Performance improvements were slower than expected due to a delay in the recovery of semiconductor demand alongside effects of inventory adjustments,” it added.
HSBC predicts a “huge earnings recovery” for Samsung as it rides the wave of investment into AI, which chips are crucial for.
The electronics manufacturer is preparing to unveil its latest smartphone this month, with on-device AI capabilities.
But Samsung is also facing tough competition from rivals such as SK Hynix, Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC).
Shares in Nvidia, which designs artificial intelligence computing chips, have just hit a record high after it revealed a new series of graphic processors, targeted towards video-gamers. The stock rose 6.4 per cent to close at $522.53 on Monday.
Chip manufacturing giant TSMC is bracing for its fourth quarter earnings release on 18 January, expecting net revenue between $18.8bn-£19.6bn (£14.8bn – £15.4bn).
The world’s top producer of advanced processors is also grappling with stagnant demand in the face of challenging market conditions.
It suffered a profit decline of 211bn New Taiwan dollar (£5.3bn) in its most recent quarter—the most substantial fall since the first quarter of 2019.