Samsung Warns Of 32% Hit To Profits On Chip Slump

Technology giant Samsung has warned of a 32% slide in its profits as demand for electronic devices and the memory chips that power them shrinks due to the global economic slowdown. The South Korean corporation expects its operating profit for the quarter to have been around 10.8 trillion won ($7.6 billion; £6.9 billion).

Advanced Micro Devices (AMD), a US chip manufacturer, also reported being impacted by a decline in computer demand on Thursday. People are reducing their spending as the cost of living rises. Samsung’s profitability from its microprocessor manufacturing division suffered as memory chip prices fell globally as a result of waning consumer electronics demand. Also, check What To Expect From The Google Pixel Launch Event?

The projections represent Samsung’s first year-over-year fall in quarterly profits in nearly three years for the three months ending at the end of September.

Samsung Chip Slump
Samsung Chip Slump

In the meantime, AMD’s revenue projections for the third quarter were nearly $1 billion (£895.6 million) less than anticipated, indicating the decline in chip demand could be much worse than anticipated. According to Lisa Su, CEO of AMD, “the PC [personal computer] market] declined dramatically in the quarter.” Demand had fallen short of expectations due to the weak economy, she added.

Shares of AMD decreased by 4.5% in New York after-hours trading.

Because of diminishing consumer demand, this will be a prevalent topic for businesses in the second half of 2022, Neil Shah of market research firm Counterpoint Research told the BBC. Electronic device sales have suffered as a result of consumers being discouraged from making purchases due to growing prices, increased borrowing rates, and the impact of Russia’s invasion of Ukraine.

As a result, businesses that acquire memory chips, such those that make cellphones and personal computers, have had to reduce their purchases as they exhaust their current inventories.

Analysts in the technology sector predict that memory chip costs will keep falling over the next three months as smartphone sales continue to decline, with no recovery in demand until the beginning of next year.

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