The South Korean tech company said that its operating profit came in at 4.3 trillion won (US$3.5 billion) for the three months through December, a decline of 69% from the same period the year before and the worst result since the third quarter of 2014.
Revenue stood at 70.5 trillion won for the same period, marking a fall of 8%.
The figures were in line with earnings guidance the company announced earlier this month.
Net profit, for which the company does not issue guidance, was 23.8 trillion won, up 120% from a year ago thanks to a one-time corporate tax issue.
The overall poor performance by the world’s biggest maker of memory chips and smartphones comes as the South Korean economy contracted 0.4% in the fourth quarter of 2022 from the third quarter of the year, the lowest growth in two-and-a-half years.
It was largely due to low shipments of semiconductors, the country’s top export item, and underscored broader problems in the global market for the key components.
Liz Lee, associate director at Counterpoint Research, said that prolonged economic uncertainties are the key factors bedevilling Samsung.
“The sharp fall in operating profit must have been driven mainly by the memory chip price drops and curbed demand for electronic devices,” Lee told Nikkei Asia in an email ahead of the announcement.
She said there was no respite on the horizon as the chip industry continues to suffer.
“The point is that Samsung and other semiconductor makers are expected to face more significant difficulties in the first half of 2023 as demand for memory and other chips continues to decline amid a deepening economic downturn,” Lee said.
“Semiconductor inventories across the industry are higher than ever, so corporate profits will deteriorate due to such an inventory burden with price drops.”
The semiconductor industry is highly cyclical and companies often calibrate their investments accordingly. Some of Samsung’s rivals are cutting back. But Samsung appears to be sticking with its spending plans, continuing to buy new equipment, largely for cutting edge chips, according to multiple suppliers.
The slump was also evident over a shorter time frame. Quarter-on-quarter, Samsung’s operating profit was down 60.3%, with revenue lower by 8.2%.
For all of 2022, Samsung’s operating profit fell 16% to 43.4 trillion won from the previous year, with revenue increasing 8.1% to 302.2 trillion won.
By sector, the chip unit took the hardest blow in the fourth quarter as its operating profit sank 96.9% to 270 billion won from the year before. Operating profit in the company’s mobile and network business, meanwhile, fell 36.1% to 1.7 trillion won during the same period.
CW Chung, a senior analyst at Nomura, said that Samsung’s challenges go beyond semiconductors and smartphones to all segments including displays.
“Poor demand [for memory chips] led to [a] significant earnings fall and still higher inventory,” Chung said in a note earlier this month. “Display, mobile experience and consumer electronics earnings seem also weaker than expected due to poor demand and higher marketing cost[s].”