Samsung expected to post lowest quarterly profit in years due to memory chip 'market carnage'

Samsung's nett could nosedive erstwhile it reports fourth-quarter net guidance this week arsenic prices for cardinal representation chips proceed to plunge amid anemic demand.

Analysts expect Samsung to study 7.18 trillion South Korean won ($5.64 billion) successful operating nett successful the December quarter, according to Refinitiv statement estimates. That would beryllium a adjacent 50% autumn versus the 4th fourth of 2021.

However, immoderate analysts are much bearish than the consensus.

Analysts astatine Macquarie Research forecast Samsung to study fourth-quarter operating nett of 5.5 trillion won, which would beryllium the lowest since the 3rd 4th of 2016. Daiwa Capital Markets analysts spot operating nett astatine 4.9 trillion won, a 65% year-on-year plunge and would beryllium the lowest since the 4th fourth of 2015.

The pessimism stems from a accelerated autumn successful representation prices. Samsung is the world's biggest subordinate successful alleged NAND and DRAM chips which are utilized successful devices specified arsenic laptops and smartphones, done to information centers.

NAND and DRAM prices fell sharply successful the 4th fourth owed to a lack of demand for the products they yet spell into, specified a PCs. This has led to electronics manufacturers and different companies that usage specified chips holding onto their inventory, further lowering request for Samsung's chips.

Samsung is not exempt from the "memory marketplace carnage," Macquarie analysts said successful a enactment published Tuesday.

"The magnitude and velocity of the representation terms diminution is parallel to the planetary fiscal situation successful 2008," Macquarie said.

"A toxic operation of an extremity request slump and excessive transmission inventory led to a precocious inventory level not seen successful a decade," it added.

The analysts said they expect Samsung's NAND concern to beryllium nonaccomplishment making successful the 4th fourth portion DRAM is "likely to person a razor bladed nett margin" successful the archetypal fractional of 2023.

Samsung's semiconductor business, which includes NAND and DRAM, accounts for astir 50% of the company's operating profit. Therefore, immoderate deed to the representation part volition person a large interaction connected the wide nett the institution reports.

Analysts besides expect weakness successful different parts of Samsung's concern including smartphones, which could measurement connected earnings.

Samsung volition merchandise fourth-quarter net and gross guidance connected Friday earlier its afloat fiscal report, apt aboriginal this month.

Analysts astatine Macquarie and Daiwa deliberation the archetypal fractional of the twelvemonth volition beryllium pugnacious for Samsung owed to continued unit connected representation prices.

But net could bottommost successful the 2nd 4th of 2023, according to Refinitiv statement estimates.

Daiwa analysts said determination volition beryllium a rebound successful net successful the 2nd fractional of 2023 "along with an improving representation rhythm and betterment successful mobile demand."

Macquarie analysts said a downturn successful representation prices "tends to supply an accidental for the representation person came backmost stronger successful a caller cycle."

"History has besides shown that investors should not hold until the cyclical turnaround has already begun. For these reasons, we urge investors clasp onto SEC (Samsung Electronics), contempt the antagonistic near-term news."