Ryan Haines/Android Authority
TL; DR
- Samsung’s profits are expected to decline by 95.8% year-on-year in the first quarter of 2023.
- If that pans out, this quarter will be the worst profitable quarter for the brand since 2009, before it launched its first Galaxy S smartphone.
- Decreased demand for chips – 55% of the company’s profits – is probably the biggest reason.
Just a few days ago, we reported that the Samsung Galaxy S23 series is selling very well, with the Ultra variant leading the charge. However, Samsung is a huge company, and just because its mobile division is doing well doesn’t mean the company as a whole is doing well.
Case in point, Samsung today announced its earnings guidance for the first quarter of 2023 (h/t Ars Technica). The numbers provided are worrying. By the company’s own metrics, it is expected to post a profit decline of 95.8% year-on-year (YoY) compared to the first quarter of 2022.
The guidance sheet states that we should expect Samsung to have a profit of around KRW 600 billion (~$450M) for the first quarter of 2023. Comparing that to a profit of KRW 14.12 trillion ($10.7B) for the first quarter of 2022, you can see how Things are really terrible.
If all of this pans out, the first quarter of 2023 could be Samsung’s worst quarter since 2009, at least as far as earnings are concerned. For context, this was one year before the first Samsung Galaxy S phone was released.
Samsung profits drop: what’s going on?
Samsung’s guidance sheet doesn’t offer much of an explanation for why profits are down so sharply. However, all signs point to very weak demand for the company’s chips. Although Samsung brand phones, TVs, computers, etc. are the most visible products that consumers see, this is not where Samsung gets most of its money. Instead, it is the division of its components that brings in the money. This includes RAM modules, memory, NAND storage, and other products that appear around the world in devices from other companies – including major competitors, such as Apple.
DigiTimes It indicates that component sales make up about 55% of Samsung’s revenue. In other words, if component sales go down, the entire company goes down.
Samsung is allegedly sitting on a stockpile of unsold chips. It is likely that the company will cut back production significantly and figure out ways to sell that inventory. However, a report from Korea Bizwire In November reports that Samsung hopes instead to increase demand for chips to move inventory. This attitude may have changed in light of this earnings guidance.