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Economic headwinds push Samsung’s Q3 profits down by 78 percent

by Admin

Amidst a challenging global economic environment, Samsung, the South Korean tech juggernaut, anticipates a sharp 78% decline in its operating profit for the third quarter, reflecting the prolonged dampening demand for consumer electronics. On Wednesday, the company released its earnings forecast, indicating an expected operating profit of approximately 2.4 trillion Korean won ($1.8 billion) for the quarter ending in September. In comparison, the figure stood at a more robust 10.85 trillion won ($8 billion) during the same timeframe last year.

Economic headwinds push Samsung's Q3 profits down by 78 percent

Moreover, a projected revenue slump of 12.7% year-over-year underscores the headwinds Samsung currently faces. Recent times have been tumultuous for the tech leader. The pervasive global economic uncertainty has nudged consumers to retain their mobile devices and laptops for more extended periods, impinging on Samsung’s profitability. Data from Counterpoint Research reveals a bleak landscape for the smartphone industry.

Their analysis indicates that “2023 could be the gloomiest year for global smartphone shipments in a decade,” with expectations of a 6% dip, bringing the total to just under 1.2 billion units. Notably, regions like North America are witnessing significant consumer reluctance when it comes to upgrading devices, as outlined in a Counterpoint report from August. Despite these setbacks, Samsung remains resilient. After an unprecedented supply shortfall due to the Covid pandemic, the global semiconductor industry experienced an oversupply, affecting Samsung’s position as the globe’s premier memory chip and smartphone manufacturer.

Yet, Bain consultancy highlighted this trend as cyclical, typical of the industry’s natural fluctuations. Conveying optimism, Samsung informed its stakeholders of an anticipated recovery in global demand in the latter half of the year. This revival, they believe, “should uplift earnings, primarily from the component business segment.” But the company remains vigilant, noting that “persistent macroeconomic challenges could pose hurdles.”

Industry analysts maintain a positive outlook for Samsung. A recent note from Nomura analysts reflects the sentiment that the memory chip sector’s downturn is temporary, and the recovery is on the horizon. Their projections anticipate a steady or minor uptick in memory prices for Q3, followed by a robust increase in Q4, advocating a ‘buy’ stance on Samsung’s shares. This confidence seems echoed in the stock market, with Samsung’s shares rallying by 3.5% in Seoul post their announcement.

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