After choosing Lee Jae-yong as its Executive Chairman, Samsung Electronics announced its earnings for Q3 2022. Earlier this month, the company revealed that its operating profit is expected to decline. Now, the company has reported its full earnings, revealing its first operating profit decline in three years.
Although Samsung Electronics' revenue was up by 4% at KRW 76.78 trillion (around $54.1 billion), compared to Q3 2021, its operating profit was down by more than 31%, at KRW 10.85 trillion (around $7.65B). This profit drop comes almost a year after the company announced its second-highest profit in its history. Most of this downturn is due to a slump in the semiconductor memory market.
Samsung's profit drop was mainly due to the weak semiconductor memory chip market
Samsung is best known for its smartphones, wearables, and TVs, but it makes most of its cash from its semiconductor memory chip business. After the extreme chip shortage during the COVID-19 pandemic, there has been an oversupply of memory chips over the past few months, leading to a price crash.
The South Korean firm's chip business reported revenue of KRW 23 trillion, a 14% drop year-over-year. This segment recorded an operating profit of KRW 5.12 trillion, which is down by almost half compared to its numbers from Q2 2022. However, Samsung Foundry, the company's contract chip-making business, had the highest revenue ever in its history.
The company has been portraying a weak outlook for its chip business for months. This slump isn't likely to end anytime soon as inflation, geopolitical issues, and rising interest rates lead to lower consumer spending. At the media briefing, Samsung Electronics' co-CEO and the head of Samsung Semiconductor, Kyung Kye-hyun, said that the company doesn't see any clear momentum next year either. To remedy the situation, Samsung is planning to increase the production of high-end memory chips used in servers as the demand for such chips is expected to remain higher.
The prices of NAND flash memory chips are expected to drop by 15%-20% in Q4 2022, according to memory market research firm TrendForce. The DRAM chip market is expected to face a similar decline over the coming months. Samsung said that it expects its annual revenue will be the highest in its history, beating its revenue records from 2021.
Galaxy Z Flip 4, Galaxy Z Fold 4, and Galaxy S sales rose in Q3 2022
The rising inflation and weaker consumer demand hurt Samsung's consumer electronics segment. However, its smartphone division (Samsung MX) saw strong growth for the Galaxy S and Galaxy Z (Galaxy Z Flip 4 and Galaxy Z Fold 4) lineup of devices. The company said it would expand its foldable and high-end smartphones next year.
Samsung DX's operating profit was KRW 3.53 trillion in Q3 2022, and KRW 3.24 trillion out of that was contributed by the smartphone division. Profits from the company's home appliances and TV division were low due to weak consumer demand.
Samsung Display makes QLED, OLED, and QD-OLED panels for mobile devices, laptops, monitors, and TVs. It contributed KRW 1.98 trillion to Samsung Electronics' operating profit for Q3 2022, which is higher than Q3 2021 and Q2 2022. It said that its supply share increased in Apple's supply chain for the iPhone 14 series.
