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Samsung warns its profits this quarter will be bad — no, like, really bad
- Samsung profits are forecast to drop by 95.8% year over year in Q1 2023.
- If this pans out, it will be the worst profit quarter for the brand since 2009, before it had even launched the first Galaxy S smartphone.
- A lower demand for chips — 55% of the company’s profits — is likely the biggest culprit.
Just a few days ago, we reported that the Samsung Galaxy S23 series is selling quite well, with the Ultra variant leading the charge. However, Samsung is an enormous company, and just because its mobile division appears to be doing fine doesn’t mean the company as a whole is doing well.
Case in point, Samsung today announced its earnings guidance for Q1 2023 (h/t Ars Technica). The numbers presented are quite sobering. According to the company’s own metrics, it stands to report a profit drop of 95.8% year over year (YoY) when compared to Q1 2022.
The guidance sheet says we should expect Samsung profits to be about 600 billion Korean won (~$450 million) for Q1 2023. Comparing that to the 14.12 trillion won in profit ($10.7 billion) for Q1 2022, you can see how dire things really are.
If this all pans out, Q1 2023 could be Samsung’s worst quarter since 2009, at least as far as profits are concerned. For the sake of context, that’s one year before the very first Samsung Galaxy S phone launched.
Samsung profits drop: What’s happening?
Samsung’s guidance sheet does not give much of an explanation as to why profits fell so sharply. However, all signs point to very weak demand for the company’s chips. Although Samsung-branded phones, TVs, computers, etc., are the most visible products consumers see, that’s not where Samsung gets most of its money. Instead, its components division is what brings in the cash. This includes RAM sticks, memory, NAND storage, and other products that appear all across the world in devices from other companies — including major competitors, such as Apple.
DigiTimes suggests that component sales make up about 55% of Samsung’s revenue. In other words, if component sales go down, the entire company goes down.
Allegedly, Samsung is sitting on a stockpile of unsold chips. It’s likely the company will scale back production significantly and figure out ways to sell off this stockpile. However, a report from The Korea Bizwire in November suggests Samsung is instead hoping for an increase in chip demand to move the inventory. That stance likely has changed in light of this concerning profits guidance.