Earnings shock at Samsung as Q4 operating profit falls 69%

Samsung Electronics suffered a 69 percent decline in operating profit in the fourth quarter of 2022, according to an earnings guidance released by the company Friday, amid a historic downturn for the chip industry.

Samsung Electronics' chip manufacturing complex in Pyeongtaek, Gyeonggi where some of the most advanced chips of the company are produced. [SAMSUNG ELECTRONICS]

Samsung Electronics suffered a 69 percent decline in operating profit in the fourth quarter of 2022, according to an earnings guidance released by the company Friday, amid a historic downturn for the chip industry.

The preliminary estimate of 4.3 trillion won ($3.3 billion) is the worst quarterly operating profit since the third quarter of 2014, far below a consensus estimate of 6.9 trillion won compiled by FnGuide.

The company was hit by falling memory chip prices and slumping sales of electronic devices from smartphones and televisions to home appliances.

Fourth quarter sales were forecast at 70 trillion won, down 8.58 percent on year and short of the market expectation of 72.7 trillion won.

For all of 2022, the company expects 43.4 trillion won in operating profit, down 16 percent from the previous year. Sales are forecast at 301.8 trillion won in 2022, up 7.9 percent.

No breakdowns were provided.

But numerous estimates by analysts suggest that businesses across the board — semiconductors, smartphones and consumer electronics — reported dismal profits compared to previous quarters.

The semiconductor business will likely experience the sharpest decline in profit and it used to be the biggest contributor.

Doh Hyun-woo, an analyst at NH Investment & Securities, predicted that the semiconductor business brought in 600 billion won in operating profit in the fourth quarter, down 93.2 percent over a year ago.

Of different types of chips, memory chips like dynamic random-access memory and NAND flash chips were hit hardest in terms of price declines.

Song Myung-sub, an analyst at Hi Investment & Securities, projects that the memory segment could even generate losses. “Samsung Electronics managed to post a profit in the fourth quarter, but the memory chip sector alone is forecast to incur losses, albeit modest, due to the hefty payment of bonuses and losses associated with the drastic price decline of NAND flash chips,” Song said.

The average selling prices for flash memory products fell 30 percent in the fourth quarter and DRAM prices 25 percent, according to Wi Min-bok, an analyst at Daishin Securities.

Doh expects Samsung’s smartphone business to post 1.4 trillion won in profit, down 46.2 percent over a year ago, and consumer electronics 200 billion won, down 71.4 percent on year.

The worst has yet to come, since the slump in chips will likely deepen in the first quarter.

Doh predicted that the semiconductor business division will likely post a 2.5 trillion won operating loss during the first quarter. If the estimate proves true, it will be the first loss for the division since 2008.

Samsung Electronics will report its actual earnings on Jan. 31. Preliminary forecasts are normally in line with the final figures.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]