Samsung had a record-breaking final quarter of 2021 financially. But the company couldn’t replicate that success last year. While we don’t yet have accurate figures, the Korean firm has shared its earnings guidance for Q4 2022. And it is estimating a massive decline in operating profit.
According to Samsung’s estimates, it generated around KRW 70 trillion (approx. USD 55 billion) in consolidated sales revenue this past quarter. This isn’t a bad figure by any means. The Q4 2022 revenue is only marginally lower than the company’s quarterly revenue in the previous five quarters, with KRW 77.78 trillion (Q1 2022) being its highest ever. It never breached the KRW 70 trillion mark before Q3 2021. So Samsung hasn’t lost sales revenue much in recent quarters even as the tech industry struggles with sluggish demand.
However, despite a healthy sales revenue, Samsung’s profit nosedived between October and December 2022. The Korean behemoth is expecting to make only about KRW 4.3 trillion (approx. USD 3.38 billion) in the year-ending quarter of last year. That’s a 69 percent drop in operating profit from KRW 13.87 trillion it made in Q4 2021 when its sales revenue was KRW 76.57 trillion. Samsung reported a profit of KRW 10.85 trillion in the third quarter of last year. So we are looking at a 60 percent quarter-on-quarter (QoQ) drop as well.
Low market demand for memory chips hits Samsung’s Q4 2022 profit
Since this is just an earnings guidance for investors and not the full Q4 2022 earnings report, Samsung isn’t going into details about which business division contributed how much to its rather paltry profit this past quarter. However, we may already have an answer. The company has always made the bulk of its money from memory chips. And the current economic headwinds have caused a massive decline in semiconductor demand and prices. Samsung unsurprisingly got hit hard by this decline. It is already expecting its semiconductor profit to drop further this year.
Smartphones are another market where Samsung enjoys massive popularity globally. However, this market is closely contested by a host of other brands, so the profit margin isn’t huge. Foldables and flagships have higher margins but the Korean brand is struggling in those segments. The Korean media recently reported that Samsung fell short of its Galaxy S22 sales target for 2022. It is now gearing up to launch the Galaxy S23 series in a few weeks. The new flagships bring plenty of upgrades over their respective predecessors. Time will tell if Samsung can its fortunes in the flagship smartphone market this year.