Samsung Electronics Co. expects its Q3-2022 operating profit to fall sharply by 32%. Reuters also reported a possible drastic drop in the operating profit of Samsung, the world's largest smartphone manufacturer.
According to flash estimates, Samsung's revenue is projected to amount to 10.8 trillion won ($7.7 billion) from July to September 2022. For comparison, in the third quarter of 2021, the figure stood at 15.8 trillion won. Previously, analysts at Refinitiv SmartEstimate expected the company's operating profit to contract by only 25% to 11.8 trillion won ($8.3 billion). Judging by preliminary calculations, Samsung's revenue increased by 2.7% to 76 trillion won.
The narrowing operating profit of the smartphone manufacturer is primarily associated with falling demand. Rising prices for electronics and memory chips also affected purchasing power. "Memory chip business is worse than expected, Dram [dynamic random access memory] chip shipments may be down by higher-teens percentage versus the second quarter," Park Sung-soon, an analyst at Cape Investment and Securities, stressed.
Some analysts expect prices for memory chips to fall by the end of 2022. If this scenario comes true, there might be a further decrease in Samsung's profit. Demand is likely to remain low until 2023.
Another reason for Samsung's profit contraction is the weakening of the South Korean won against the US dollar for the first time in 13 years. Samsung has to pay astronomical sums for imported components.
In August, Samsung sharply reduced the production of smartphones due to supply chain disruptions and skyrocketing inflation.
