Samsung thinks its profits for the last three months of 2022 will drop by 69% to their lowest level in eight years.
The world’s largest maker of smartphones, memory chips, and TVs said that its operating profit for the period would drop to about $3.4 billion (£2.8 billion).
Because the world economy is slowing down, the price of memory chips and the demand for electronic gadgets are falling.
In the past few months, consumers have cut back on spending, which has hurt tech companies all over the world.
It was Samsung’s lowest profit in a quarter since 2014, and investors had been hoping for about 5.9 trillion won.
The South Korean company said that the number of orders for computer chips dropped more than expected because customers were getting rid of their stock of these important parts for digital devices.
“In the fourth quarter, customers changed their stockpiles to save more money, which caused demand for memory to drop more than expected,” Samsung said in a statement.
“Macro issues that have been going on for a long time have kept smartphone demand low,” the report said.
Samsung plans to put out its full financial report on January 31.
It’s the latest big tech company to say that the weak global economy is hurting its business.
Sales also slowed down when people at home spent a lot of money online after the pandemic.
People are getting more worried about an economic downturn, which is causing sales to slow down and thousands of jobs to be lost in the technology industry around the world.
This week, Amazon said it would cut more than 18,000 jobs to save money. This would be the most jobs the company has ever cut.
Meta said in November that it would let go of 13% of its employees.
The social media company will lay off 11,000 of its 87,000 employees worldwide. This is the first time the company has laid off a large number of people at once.
Mark Zuckerberg, the CEO of Meta, said that the cuts were “the hardest changes we’ve ever made in the history of Meta.”
A lot of people were fired from Twitter before the news came out. About half of the employees were let go in October when billionaire Elon Musk took over the company.
Samsung says profits will go down by 32%
In October, Samsung, a big tech company, said that its profits would drop by 32% because fewer people are buying electronic devices and the memory chips that make them work. The world economy is slowing down, so this is happening.
The South Korean company thought its operating profit for the last quarter was about 10.8 trillion won ($7.6 billion; £6.9 billion).
US-based Advanced Micro Devices (AMD) also said that a drop in sales of computers hurt it.
The cost of living is going up, so people are buying less.
When the price of memory chips dropped worldwide because fewer people were buying consumer electronics, Samsung’s profits from making microprocessors went down.
For the first time in three years, estimates for the three months ending in September show that Samsung’s profits were lower than they were at the same time last year.
Also, AMD’s revenue estimates for the third quarter were about $1 billion (£895.6 million) less than before. This shows that the drop in chip demand could be much worse than expected.
During New York’s after-hours trading, AMD’s stock fell by 4.5%.
People are less likely to buy electronics because prices are rising, interest rates are rising, and Russia’s invasion of Ukraine is making things worse.
Companies that buy memory chips, like those that make phones and computers, buy less as they use up what they already have.
Analysts in the tech industry think that memory chip prices will continue to drop over the next three months as sales of smartphones continue to drop. However, they believe demand will go up again at the start of next year.
The US’s role
In August, US President Joe Biden signed a law that gives $280 billion (£232 billion) to high-tech manufacturing and scientific research. People feared that the US would fall behind China in technology, so this was done.
Companies that build factories in the US to make computer chips will get tax breaks.
Read Also: China: New export rule hit US chipmakers
About 10% of the world’s semiconductors are made in the United States. As a result, semiconductors are used in everything from cars to cell phones. In 1990, the US made almost 40% of all the semiconductors in the world.
The Chinese Embassy in Washington was against the semiconductor bill because it made them think of a “Cold War mentality.”
Some US chipmakers are already feeling the effects of how hard the US government is making it to sell US technology to China. For example, earlier this month, US officials told Nvidia and AMD to stop selling chips for AI to China.