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Samsung reports 78% drop in profit as chip demand remains weak

today 10/11/2023
Samsung reports 78% drop in profit as chip demand remains weak Samsung has issued a warning that its operating profit is expected to plummet by 78% in the third quarter due to lower demand for consumer devices. The company estimates an operating profit of 2.4 trillion Korean won ($1.8 billion) for the three-month period ending in September, compared to 10.85 trillion won ($8 billion) in the same period last year. Revenue is also projected to decrease by 12.7% from last year. This decline comes as global economic uncertainty prompts consumers to hold onto their cell phones and laptops for longer, resulting in major losses for Samsung. Counterpoint Research predicts that 2023 will be the worst year for global smartphone shipments in a decade, with shipments expected to decline by 6% to fewer than 1.2 billion units. The reluctance of consumers to upgrade their devices in major markets like North America has further contributed to Samsung's struggles. The company's operating profit already plummeted by 95% in the first quarter and experienced similar results in the second quarter. The global semiconductor industry, including Samsung, has been affected by the supply shortage caused by Covid and is now facing an oversupply in some areas, leading to losses. Bain predicts that the semiconductor industry's post-pandemic rebound has increased capacity to the point of oversupply. However, Samsung has informed shareholders that it anticipates a gradual recovery in global demand in the second half of the year, which should improve earnings. Analysts believe that the downturn in memory chips will also reverse, benefiting manufacturers like Samsung. Nomura analysts expect a recovery in the sector to accelerate through the rest of the year, with memory prices remaining flat or slightly increasing in the third quarter and showing strong growth in the fourth quarter. Following Samsung's announcement, the company's shares rose by 3.5% in Seoul.
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