SAMSUNG ELECTRONICS’ EARNINGS PLUNGE

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Samsung Electronics announced its third quarter performance. The nation's premier electronic maker saw its operating profit shrink more than 30% from the same quarter last year with its profit from semiconductors cut in half. The problem is that things are not looking any better down the road.

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Samsung Electronics announced its third quarter operating profit at a little over 10.85 trillion won. That's more than 30% lower than the same period last year. Although the revenue set a third quarter high, the company's profit suffered a different fate. Samsung's flagship memory semiconductor business did not perform as well as expected. The operating profit of semiconductor had remained between eight and ten trillion won for the past four quarters, but it plunged to a little over five trillion won, just half of the usual amount.

[Soundbite] Han Jin-man(Executive Vice Pres., Memory Global Sales, Samsung Electronics) : "Our customers adjusted their inventories, which caused our inventory to increase as well."

While the manufacturing cost increased due to high exchange rates, high interest rates and inflation compelled consumers to spend less on household appliances, ultimately leading to Samsung's poor performance. Samsung had to relinquish the number one global semiconductor sales title to Taiwan's TSMC. SK Hynix, another leader in Korea's memory semiconductor industry together with Samsung Electronics, also saw its Q3 profit plummet 60% on-year. The prices of memory semiconductors in Q4 may fall even lower than in Q3. Next year's semiconductor market growth is projected in the 4% range while that of memory chips is below 1%. With nations around the globe cutting their fiscal spending and as Russia's invasion of Ukraine drags on, concerns mount over the very real possibility of the semiconductor industry going into a deep slump.

[Soundbite] Seo Seung-yeon(Researcher, Shinyoung Securities) : "Given the exhaustion of current inventories, recovery doesn’t seem likely in the short term. This situation is inevitable because interest rate hikes result in less disposable income."

Meanwhile, Samsung Electronics announced that it will not purposefully cut its production and it will continue to make investments as planned.