Image Source: Daily Pioneer
Samsung thinks its profits for the last three months of 2022 will drop by 69% to their lowest level in eight years.
The world’s biggest maker of smartphones, memory chips, and TVs said that its operating profit for the period would drop to about $3.4 billion (£2.8 billion).
The price of memory chips and the demand for electronic gadgets are falling because the world economy is slowing down.
In the past few months, people have cut back on spending, which has hurt tech companies worldwide.
Since 2014, this was Samsung’s lowest quarterly profit, and investors had hoped for about 5.9 trillion won.
The South Korean company said that the number of orders for computer chips fell more than expected because customers were getting rid of their stock of these essential parts for digital devices.
Samsung said in a statement, “In the fourth quarter, customers changed their stockpiles to save more money, which caused demand for memory to drop more than expected.”
The report said that the low demand for smartphones was due to long-term macro issues.
On January 31, Samsung plans to release its full financial report.
It is the latest big tech company to say that the weak global economy is hurting its business.
After the pandemic, people at home spent a lot of money online, hurting sales.
People are getting more worried about an economic downturn, which is slowing sales and causing thousands of jobs to be lost around the world in the technology industry.
This week, Amazon said it would cut more than 18,000 jobs to save money. This would be the most jobs ever lost by the company.
In November, Meta said it would let go of 13% of its workers.
The social media company will fire 11,000 of its 87,000 workers worldwide. This is the first time that the company has fired a lot of people at the same time.
Mark Zuckerberg, the CEO of Meta, said that the cuts were “the hardest changes we’ve ever made in the history of Meta.”
Before the news got out, many people were fired from Twitter. When billionaire Elon Musk took over the company in October, he fired about half of the workers.
Samsung says profits will drop by 32%
In October, the big tech company Samsung said its profits would drop by 32% because fewer people are buying electronic devices and the memory chips that make them work. This is happening 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 buy 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 bought consumer electronics.
Estimates for the three months ending in September show that Samsung made less money than it did at the same time last year for the first time in three years.
Also, AMD’s estimates for revenue for the third quarter were about $1 billion (£895.6 million) less than before. This shows that the drop in demand for chips could be a lot worse than thought.
During after-hours trading in New York, AMD’s stock dropped by 4.5%.
Prices are going up, interest rates are rising, and Russia’s invasion of Ukraine is making things worse, making people less likely to buy electronics.
Companies that buy memory chips, like those that make phones and computers, buy less as they use what they already have.
Analysts in the tech industry think that the prices of memory chips will keep going down over the next three months as sales of smartphones keep going down. But they think demand will rise again at the beginning of next year.
What the US did
In August, US President Joe Biden signed a law that gives high-tech manufacturing and scientific research $280 billion (£232 billion). People feared that the US would fall behind China in technology, so this was done.
Tax breaks will be given to companies that build factories in the US to make computer chips.
The United States makes up about 10% of the world’s semiconductors. As a result, semiconductors are used in cars, cell phones, and many other things. In 1990, almost 40% of all semiconductors were made in the US.
The Chinese Embassy in Washington didn’t like the semiconductor bill because it reminded them of the Cold War.
Some US chipmakers are already feeling the effects of how hard it is to sell US technology to China because of what the US government is doing. For example, US officials told Nvidia and AMD to stop selling AI chips to China earlier this month.