Samsung Electronics expects to report a sharp decline in operating profit for the third quarter as its mainstay semiconductor business took a hit from weak consumer demand for electronic devices.
In an earnings guidance announcement Friday, the Suwon, Gyeonggi-based company said it expects to report 10.8 trillion won ($7.66 billion) in operating profit during the July-September period, down 31.7 percent on-year.
The preliminary profit missed FnGuide’s market consensus of 11.9 trillion won and is the lowest figure since the first quarter of 2021.
Sales are forecast to be 76 trillion won, up 2.7 percent on year, but short of the market expectation of 78.3 trillion won.
No breakdown in sales was provided.
Profit from memory chips, the biggest contributor to Samsung Electronics’ profits, is projected to significantly shrink in the third quarter due to weak demand and lower prices.
Chae Min-sook, an analyst at Korea Investment & Securities, predicted that the semiconductor business generated 4.1 trillion won in operating profit, down 59.2 percent on year and a decline of 54 percent on quarter.
“With unfavorable market conditions in the memory chip sector, shipments of dynamic random-access memory and NAND flash chips decreased and their average selling prices declined, which widened the loss of profit,” Chae said.
Price declines began in the final quarter of last year, but the trend accelerated this year as slowing demand translated into ballooning inventories and cutting orders for chips.
“Memory pricing began to decline from the fourth quarter of 2021 due to weakening demand for certain consumer electronics,” market tracker TrendForce said in a recent report.
“Coupled with the impact of rising inflation, the Russian-Ukrainian war, and pandemic policies, demand in peak season was weak, resulting in inventory pressure that has extended from the buyer side to manufacturers,” it said.
Smartphone and consumer electronics businesses are not in good shape, neither.
Samsung’s Mobile eXperience division, which includes smartphones and network equipment, will likely generate 3.2 trillion won in operating profit, down 4.8 percent over a year ago, according to Kim Sun-woo, an analyst at Meritz Securities.
Kim expects the consumer electronics division’s operating profit to plunge by 60.5 percent on-year to 300 billion won.
LG Electronics also missed market estimates for operating profit, but its sales exceeded estimates, according an earnings guidance released by the company Friday.
The electronics maker expects to record 746.6 billion won in operating profit during the third quarter, up 25.1 percent on year, but below the market estimate of 868.5 billion won.
Sales are forecast at 21.2 trillion won, up 14 percent and above the consensus of 20.2 trillion won. That figure is an all-time high for quarterly sales.
LG Electronics cited sagging consumer sentiment and rising costs as factors behind the lower-than-expected profit.
“In the consumer electronic business, we maintained the growth trajectory, but growth slowed due to rising inflation, reduced purchases and faltering demand in the electronics market,” the company said in a statement filed as an electronic disclosure.
Its automotive parts business will post improved sales and profit thanks to an increase in production of cars and efficient management of supply chain, it said.
BY PARK EUN-JEE [park.eunjee@joongang.co.kr]
