Analysts expect the Q3 earnings of Samsung Electronics to drop by 25 percent, the first year-on-year decline in almost three years. Economic slowdown dampens demand for electronic devices and the processors that run them.

Inflation is rising worldwide, central banks are rapidly raising interest rates, recession concerns are building and the consequences of Russia’s invasion of Ukraine loom. As a result, both businesses and consumers have reduced their expenditures.

Based on a Refinitiv SmartEstimate from 22 analysts, the operating profit of Samsung — the world’s largest memory chip and smartphone maker — dipped to 11.8 trillion won ($8.3 billion) in the quarter that started in July and ended in September.

The first profit drop since 2020

This would be the first profit drop since the start of the pandemic (Q1 2020) and the weakest quarterly profit amount since Q1 2021. The pandemic compelled consumers to stay at home, which increased demand for gadgets and drove substantial profit growth for the South Korean electronics giant.

Now, the numbers are on the decline. As Samsung is a leading memory chip, TV, display and smartphone producer, earnings are tied to demand, said Greg Roh, head of research at Hyundai Motor Securities.

Foldables could not save Samsung

According to TrendForce statistics, the prices of select DRAM memory chips, which are extensively used in smartphones and PCs, dropped by 14 percent in the third quarter. The prices of NAND flash chips, which are used in data storage, declined by 8 percent.

Samsung’s mobile unit is also likely to suffer a 17 percent drop in earnings to 2.8 trillion won, despite the debut of the company’s expensive new foldable devices during the quarter, which lifted the average retail price.

According to Kim Yang-Jae, a Daol Investment & Securities analyst, Samsung’s smartphone shipments fell 11 percent in the quarter compared to the same period last year, totalling around 63 million devices as distribution networks trimmed orders.

The average of seven analyst estimates revealed that the operating profit of Samsung’s semiconductor unit decreased by roughly a third to 6.8 trillion won. Micron Technology, a competitor in memory chips, slashed spending considerably for the coming year and warned of tough times ahead. 

Tip: ‘Samsung to raise chip prices by 20 percent’