Samsung Electronics’ working revenue plummeted 69% to $3.4 billion within the quarter that resulted in December to an eight-year low, based on its preliminary estimates, as the worldwide demand for reminiscence chips and smartphones wanes as a consequence of excessive inflation and slowing financial system.
“Amid continued exterior uncertainties, together with a possible international financial downturn, total earnings decreased sharply quarter on quarter as we noticed a big drop within the reminiscence enterprise outcomes as a consequence of lackluster demand and weaker gross sales of smartphones,” the corporate mentioned in a press release.
The reminiscence chipmaker and smartphone producer noticed gross sales of 70 trillion gained ($55 billion) within the quarter, down roughly 8.6% over the identical interval a yr in the past.
The sharp drop in demand for reminiscence chips, together with DRAM and NAND, that are utilized in devices and information facilities, has additionally pushed producers and distributors to decrease their worth, based on TrendForce.
“For the reminiscence enterprise, the decline within the fourth quarter demand was larger than anticipated as prospects adjusted inventories of their effort to additional tighten funds by issues over deteriorating shopper sentiment,” the market researcher mentioned. “Income from the cellular expertise enterprise declined as smartphones gross sales and income decreased as a consequence of weak demand ensuing from extended macro points.”
Many chip corporations, together with Micron and SK Hynix, plan to slash their capital expenditure and scale back inventories this yr. Samsung has beforehand mentioned it doesn’t plan to cut back its capex.
Geopolitical threat is one other concern for semiconductor firms tangled within the tech warfare between the U.S. and China. Final October, the U.S. rolled out new export controls requiring firms to acquire licenses to promote semiconductor chips for supercomputers and synthetic intelligence to Chinese language corporations.
Samsung reportedly has obtained a one-year waiver from the US authorities to proceed ordering U.S. chip manufacturing tools to its fabs in China, such because the NAND flash reminiscence chip plant in Xi’an and a chip-packaging facility in Suzhou. Regardless of the exemption to keep up the services in China, there may be all the time a threat that the U.S. restriction may broadly hit chip corporations with prospects in China.
South Korea mentioned earlier this week that it plans to extend tax breaks for semiconductor firms in a bid to help Korean chip firms and beef up the nation’s important business. The transfer comes after Samsung and SK Hynix paid the best company taxes in 2021 amongst different prime 100 international chip makers, together with TSMC, Intel and SMIC.
The massive chip conglomerates in South Korea will profit from a tax credit score of 15%, up from the deliberate 8%, on funding in manufacturing services; small and mid-sized semiconductor firms will get a tax break of as a lot as 25%, up from 16%, based on South Korean finance ministry.
The tech big will announce a full earnings assertion, together with web revenue, for the fourth quarter and supply extra particulars on on the finish of this month.
