Samsung has reported a drop in profits for its third quarter, according to CNET. This is the first time for Samsung in nearly three years. The tech giant manufactures a variety of devices like phones, televisions, tablets, and computers, but they are also known for the quality of its memory chips.

It could be due to the oversupply in the market, which has led to the company's prices going significantly lower. Furthermore, the global economic slump has lessened the demand for electronic devices. It is expected that Samsung's earnings will fall further this fourth quarter.

Earnings and Statistics

The Q3 earnings for the company came in at 10.85 trillion won ($7.65 billion), which was 31% less than its third-quarter earnings in 2021, which was 15.8 trillion won. A year before, Samsung also recorded its second-highest operating profit. Its revenue had increased by about 4%, which equates to 76.78 trillion won ($54.1 billion).

Reported sales of the company's semiconductor business in the third quarter are at 23 trillion won. This shows a 14% decrease from its reports in the year prior, which can be due to the effects of inflation, rising interest rates, and geopolitical tension, which makes customers reluctant to purchase electronics.

The high inflation led the central banks in the US and India to South Korea to raise interest rates. This could also be a factor in why there is a decline in demand since some people borrow from the bank to be able to buy the devices.

As mentioned in Nikkei Asia, Choi Do-Yeon, an analyst from Shinhan Securities, said that the demand for smartphones, PCs, and TVs is dropping fast, while semiconductors are dropping faster. He added that poor macroeconomic data are also a burden.

The Korea-based company's NAND flash memory which is used in portable consumer devices, as well as DRAM chips for smartphones and PCs, will also drop in price from 15% up to 20% in the fourth quarter, as mentioned by a market researcher, TrendForce. 

According to Reuters, Samsung is expected to keep expenditure cuts to five percent for memory chips, this 2022. This is so they could continue the migration into more advanced manufacturing.

Samsung stated that its profit from the mobile business fell from 3.36 trillion won to 3.24 trillion won in a year. The market downturn was offset by newly launched wearables, and high-end smartphones demand.

Read Also: How A Rise in Inflation is Affecting Our Everyday Finances

Recovery

Samsung may focus on its flagship smartphones like the new foldable phones to meet the demand for premium products. This could aid in the company's recovery state from this year's continuous decline. 

Analysts have claimed that Samsung will be able to defend its profits more than peers because of the economies of scale. However, Kyung Kye-hun, Samsung's semiconductors unit head and company co-CEO, expressed that the second half of the year looks bad and that next year doesn't show a clear momentum for improvement as of now. 

Related: Samsung Negotiates to Increase Chipmaking Prices by Up to 20%