Samsung Profits expected to plummet, Marred by Macroeconomic Issues

The future doesn't look bright for tech giant Samsung as it anticipates its financial quarter to close with a significant 96% drop in profits.

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Samsung has been battling numerous challenges in the past year, predominantly macroeconomic conditions continuously nibbling away at its profits. The company's forthcoming results could potentially be the lowest ever, as illustrated by the forecast Samsung presented on 7th July.

The prediction sketches a bleak image of an approximately 600bn won operating profit. That's a nearly 96% dip compared to last year's same quarter.

One of the Steepest Drops in Samsung's Recent History

If this pans out, the drop would be one of the largest Samsung has had to swallow amidst recent profit drops. The company's current financial posture could possibly be the worst since 2009.

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Let's remember that Samsung saw similar 96% profit drops in the first quarter of this year. As if this was not enough, the last quarter of 2022 also marked Samsung's lowest since 2014.

The billion-dollar question is: What hit Samsung's profits this hard? ⚡

Exploring Samsung's Financial Nightmare

The start of the year was particularly frigid for Samsung, citing prolonged macroeconomic situations. Specifically, the rising cost of living and interest rates leading to decreased demand for computer chips. This bleak earnings drop came during an economy-wide tech slowdown. Countless tech companies turned towards cost-cutting and layoffs.

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Besides, the global chip industry has been struggling for years due to supply chain disruptions and consistent shortage. At the same time, the smartphone and PC markets faced sales decline, as per market research company IDC.

The report showed that tech competitor Apple is inching ever so close to Samsung, although Samsung still leads in smartphone sales.

Samsung's "Business as Usual" Approach vs. Economic Reality

While competitors were diligently reducing costs, Samsung resisted the trend. The company continued spending in its semiconductor and smartphone businesses, hoping for a market recovery. However, these expectations were rocked in April when the company's Q1 results were announced.

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The company was dealt a hard blow to its profits and consequently had to slash its memory chip production considerably. Interestingly, Samsung's approach was a stark contrast to TSMC who decided to manage its business prudently.

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