Weak demand for its chips and smartphones will lead to a sharp drop in Samsung’s profits in 2022

Samsung’s profits will plummet in 2022. The obvious slowdown in demand for chips and smartphones is to blame.

Samsung announced a sharp drop in profits in 2022, mainly due to weak demand for its chips and smartphones, which are the South Korean giant’s main revenue drivers. In its latest financial report, the company reported about $245.4 billion in annual revenue, a new record for the company. But it also recorded an operating profit of $35 billion for 2022, down $6.9 billion from the previous year.

Samsung profits to plummet in 2022

“The business environment deteriorated significantly in the fourth quarter due to weak demand due to the global economic slowdown,” the company explains. While the tech giant’s foundry division is seeing profit growth thanks to the diversification of its customers and applications, the semiconductor division as a whole is struggling to survive. Demand for wood chips was rather weak as customers adjusted and reduced inventories amid economic uncertainty. Chip prices also fell, mainly due to a surplus of unsold products, which contributed to the drop in profits seen this year.

In the fourth quarter of 2022, Samsung’s semiconductor division generated $16.3 billion in consolidated revenue, but only $219 million in operating results. Samsung expects this downward trend to continue in the coming months, but demand for its semiconductors is expected to pick up again in the second half of this year.

Blame the demand for chips and smartphones in a sharp slowdown

Similarly, demand for smartphones remained rather weak in the fourth quarter of 2022. Sales of the brand’s more affordable handsets have fallen, and while the flagships have met expectations, their sales have remained lower than in previous quarters. The company expects global demand for smartphones to decline further in 2023 “due to macroeconomic conditions.” But since he also foresees that demand for the highest-end devices will continue to be strong, he wants to increase the “competitiveness of his premium flagship products.”

Tomorrow Samsung is organizing its first Unpacked event of this year 2023, the next generation of flagships from the South Korean giant Galaxy S23 should be formalized.