Samsung Electronics revealed that its revenue is likely to increase 3 percent during the third quarter of 2022 to 76 trillion won from the same period a year earlier, Samsung said in a short preliminary earnings release.
Samsung is due to release detailed earnings on October 27. Samsung will share additional details about revenue break-up in the detailed earnings report.
Samsung warned that it is expecting 32 percent drop in quarterly operating earnings, as demand for electronic devices and the memory chips that power them shrank due to an economic downturn.
The world’s largest memory-chip and smartphone maker estimated its profit fell to 10.8 trillion won ($7.67 billion) in July-September – its first year-on-year decline in nearly three years – from 15.8 trillion won a year earlier.
Samsung’s chip profits have suffered from drop in memory chip prices due to less demand for consumer electronics, hurt by rising inflation, higher interest rates and the impact of Russia’s invasion of Ukraine, analysts said.
This has led memory chip buyers such as smartphone and PC makers to reduce purchases and use up existing inventory, driving down shipments. Research firm IDC says shipments of smartphones will dip 6.5 percent to 1.27 billion units in 2022.
Analysts expect memory chip prices to plunge in the current quarter, especially due to a slump in mobile demand, causing a further dip in Samsung’s fourth-quarter profits.
Demand for memory chips is not expected to recover until early next year. DRAM prices are estimated to have posted a quarterly decline of 10-15 percent in the third quarter. TrendForce projected a dismal outlook for the coming months, with DRAM prices likely to further decline 13-18 percent and NAND flash to drop 15-20 percent in the fourth quarter.
Rival Micron Technology cut its investment plans by 30 percent and chip equipment spending up to 50 percent for next year. SK Hynix has hinted at a possible cut in investment.
Samsung is not discussing a memory chip production cut, Han Jin-man, executive vice president and head of the memory global sales and marketing at Samsung Electronics, told reporters at the annual Samsung Tech Day in San Jose, California, in the United States on Wednesday, according to Yonhap news agency.
Analysts have said Samsung remains over-exposed to demand dependent businesses such as mobile phones and screens that are vulnerable to economic downturns, in the absence of a larger share in long-term chip contract manufacturing.
“Samsung needs product lines with a high share of long-term agreements, exclusive market dominance and a premium brand with high consumer preference, but it still needs time to get there,” said Greg Roh, head of research at Hyundai Motor Securities.