As businesses report their financial performance for the 2022 final quarter and full year, Supply Chain Matters highlights select bellwether firms that we consider a relatively good indicator of anticipated 2023 industry supply chain challenges.
In the company’s reporting of Q4 and full year 2022 financial performance, Samsung Electronics indicated that the demand for semiconductor, flash memory and smartphones will be muted in the first half of this year, and could recover by the second half.
For the quarter that ended on December 31, 2022, the company reported KRW 70.5 trillion won in consolidated revenue and KRW 4.3 trillion won operating profit. The latter represented a 9 percent drop in operating income for the final quarter of 2022.
In its reporting highlighting Samsung’s financial performance, The Wall Street Journal indicated (Paid subscription requirement): “Samsung’s smartphone and networks business unit, a recognized global leader by overall volume, reported a 36 percent decline in Q4 operating profit attributed to greater-than expected declines in sales of mass market devices, but sales of its pricier flagship models held up relative to the macroeconomic environment.” Cited was data from market researcher IDC indicating that worldwide smartphone shipments declined 18.3 percent in the all-important holiday season quarter. The company’s director of the mobile business division further validates that the smartphone market is expected to contract this year, amid a global economic slowdown.
For the full year, Samsung reported KRW 302.2 trillion won in annual revenue and a record high KRW 43.4 trillion won in operating profit. A one-time change in Korean tax law reportedly led to a decline in the Company’s corporate tax liability for the final quarter.
In the company’s release of 2022 financial performance, the following was summarized:
“The business environment deteriorated significantly in the fourth quarter due to weak demand amid a global economic slowdown. Earnings at the Memory Business decreased sharply as prices fell and customers continued to adjust inventory. The System LSI Business also saw a decline in earnings as sales of key products were weighed down by inventory adjustments in the industry. The Foundry Business posted a new record for quarterly revenue while profit increased year-on-year on the back of advanced node capacity expansion as well as customer base and application area diversification.”
A bright spot remained the performance of the company’s semiconductor business which set a new record in Q4 for quarterly revenue attributed to advanced nodes for customers and the continuous evolution of mature processes. That stated, Samsung expects foundry utilization rates to fall and earning to decline in the first quarter of 2023.
Outlook for 2023
The release indicates in-part, the following outlook:
“For 2023, while the macroeconomic uncertainties are expected to persist, the Company anticipates demand to begin recovering in the second half. The semiconductor business will continue to reinforce market and technology leadership and expand the proportion of advanced nodes and products..”
Summary highlights of the company various supply network business sectors indicate in-part:
- Smartphone demand to decline year-on-year due to economic slowdown in major regions. “Mass market models are expected to be impacted the most while consumer demand for premium smartphones and tablets is projected to stay relatively solid.”
- For the television and displays segment, overall demand is expected to remain stagnant because of continued market uncertainties.
- For the semiconductor segment, Samsung indicated a continued focus on high end advanced devices amid a weak memory chip market and soft global IT
Final Note
As we post this Samsung Electronics commentary, Intel has reported rather disappointing Q4 financial performance reflecting an overall contraction in the demand for the company’s semiconductor microprocessors, and growing competition in the semiconductor market segment. The company reported a $664 million dollar loss in Q4 amid a 32 percent decrease in Q4 revenues. Intel also pointed to gloomy market conditions in the high tech sector along with bloated chip inventories.
The next high tech and consumer electronics supply chain bellwether company to report will be Apple which formally reports later this week. All eyes will be on iPhone sales and delivery performance in the throws of the significant Covid lockdown disruptions that occurred in the Foxconn “iPhone City” production complex during December.
Stay tuned.
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