Product reviews, deals and the latest tech news

Samsung’s quarterly profit drops to an 8-year low due to weak demand for smartphones and memory chips

Preliminary estimates show that as worldwide demand for memory chips and smartphones wanes due to high prices and sluggish economy, Samsung Electronics had its operating profit fall 69% to $3.4 billion in the quarter ending in December, an eight-year low.

Company profitability “decreased dramatically quarter on quarter as we experienced a considerable reduction in the memory business results owing to poor demand and worse sales of smartphones,” it stated in a statement, “under ongoing external concerns, including a potential global economic slowdown.”

Sales for the quarter were 70 trillion won ($55 billion), a decrease of around 8.6 percent from the same time a year earlier.

According to TrendForce, the precipitous decline in demand for memory chips like DRAM and NAND, used in gadgets and data centres, has prompted manufacturers and sellers to cut the price of these products.

The market researcher noted, “For the memory business, the decrease in fourth quarter demand was more than projected as customers modified inventory in their endeavour to further tighten finances by concerns about weakening consumer mood.” Profits from the mobile experience industry went down as sales and revenue from smartphones dropped owing to sluggish demand caused by protracted macro difficulties.

In 2019, many semiconductor manufacturers, including Micron and SK Hynix, will cut capital spending and inventory levels. In the past, Samsung has stated that it has no plans to lower its capital expenditures.

For semiconductor businesses caught in the middle of the tech battle between the United States and China, geopolitical risk is an additional source of worry. In October of last year, the United States implemented new export regulations that mandated licencing for the transfer of semiconductor chips used in supercomputers and artificial intelligence to Chinese enterprises.

According to reports, Samsung has been granted a one-year waiver from the United States government to continue importing machinery used in the production of semiconductors to its fabs in China. These fabs include a NAND flash memory chip plant in Xi’an and a chip-packaging facility in Suzhou. Despite the exception to keep the facilities in China, there is always a chance that the U.S. prohibition might widely strike semiconductor businesses with clients in China.

Earlier this week, South Korea said that it intends to expand tax benefits for semiconductor businesses in an effort to help Korean chip companies and strengthen the country’s crucial industry. Reason for change is that in 2021, Samsung and SK Hynix paid the highest corporate taxes among the top 100 global chip producers, which included TSMC, Intel, and SMIC.

The South Korean finance ministry said that giant chip conglomerates would receive a 15% tax credit, up from the originally proposed8%, on investments in manufacturing facilities, while small and medium-sized semiconductor businesses would receive a tax break of up to25%, up from 16%.

At the month’s conclusion, the IT behemoth will reveal the entire financial results for the fourth quarter.