SEOUL -- Samsung Electronics Co Ltd reported a worse-than-expected 32 per cent drop in quarterly operating earnings on Friday, as demand for electronic devices and the memory chips that power them shrank due to an economic downturn.
The world's largest memory-chip and mobile maker estimates its profit fell to 10.8 trillion won $7.67 billion in July-September, its first year-on-year decline in nearly three years - from 15.8 trillion won a year earlier.
The profit was 8.5 per cent less than the 11.8 trillion won SmartEstimate from Refinitiv.
Revenue likely rose 3 per cent from the same period a year ago to 76 trillion won, Samsung said in a short preliminary earnings release.
On October 27 there is a chance that Samsung will release detailed earnings.
Samsung's chip profits suffered from plunging memory chip prices due to weaker demand for consumer electronics, hurt by rising inflation, higher interest rates and the impact of Russia's invasion of Ukraine, analysts said.
Memory chip buyers such as a smartphone and PC makers are starting to reduce purchases and use up existing inventory, leading to a reduction in shipments and ushering in an industry downcycle.
In the current quarter, memory chip prices are expected to plunge due to a slump in mobile demand, which has led to a further dip in Samsung's fourth-quarter profits.
Demand for memory chips is not expected to recover until early next year.
Rival Micron Technology was the first memory chip maker to officially cut its investment plans for next year, and larger rival SK Hynix hinted at a possible investment cut.
According to Yonhap news agency, Samsung is not currently talking about a memory chip production cut.
In the absence of a larger share in long-term chip contract manufacturing, Samsung is exposed to demand dependent businesses such as mobile phones and screens that are vulnerable to economic downturns, according to analysts.
Greg Roh, head of research at Hyundai Motor Securities, said that Samsung needs product lines with a high share of long-term agreements, exclusive market dominance and a premium brand with high consumer preference.
Roh said that folding display panels and advanced foundry processes were important for the company to be less exposed to economic downturns.