Supply Chain Matters highlights high tech and consumer electronics bellwether Samsung Electronics and its warning that Q4-2022 quarterly profitability and revenues would fall short of revised estimates.

 

As businesses either warn or report their financial performance for the final quarter of 2022, Supply Chain Matters highlights select bellwether firms that can be considered a relatively good indicator of ongoing industry supply chain challenges.

Samsung Electronics is considered to be one of the largest global producers of either end-item smartphones and consumer electronic appliances, along with  electronic components such as semiconductor and memory chips, electronic screen displays, and other electronics utilized by other companies in their supply network needs.

Last week the high-tech and consumer appliances provider warned that its Q4-2022 quarterly profitability would reportedly decline by 69 percent, the equivalent of over $3 billion dollars on a year-over basis. That profitability warning represented the lowest profit for the company since Q3-2014. Total revenues are expected to decline by 8.6 percent. Both estimates of profitability and revenues were below the consensus of equity analyst expectations.

Samsung indicated in its warning that a larger-than-expected pullback in order rates in its electronic components businesses, including price weaknesses in the company’s memory business segments have led to lowered expectations. On the product demand side, falling global sales of branded home appliances and smartphones were another headwind.

In its reporting of the warning, The Wall Street Journal added that the high tech provider is the globe’s largest producer of both multitask automation DRAM, along with expanded storage capacity NAND chips. Both of these product areas reportedly drive the bulk of the company’s quarterly income, and this business segment has been the most exposed to supply-demand swings and consequent price drops.  Data cited from Goldman Sachs indicates that fourth quarter 2022 prices of the company’s two memory lines are projected to have fallen by upwards of 30 percent. Rival memory ship producer Micron Technology indicated in November that quarterly revenues dropped by nearly half and prompting plans to reduce supply in 2023. Micron’s CEO indicated that the memory chip sector was experiencing its most severe supply imbalance in 13 years and that profitability levels would be challenged through 2023.

Samsung, which restructured its operating business structure starting in 2022 placing the conglomerate’s electronics components and semiconductor business as the engine for future growth and profitability, will formally report its lates quarterly financial performance at the end of January.

In our recent Part One posting of our research arm’s 2023 Predictions for Industry and Global Supply Chains, we highlighted a prediction that industry supply chain management teams should anticipate continued economic uncertainty in 2023 including downside economic risks. We further highlighted global and regional PMI indices at the end of December 2022 which are pointing to a less optimistic global production outlook, at least for the first half of 2023.

Samsung’s and other ongoing semiconductor and electronics supplier’s warnings and forecasts reinforce the specific implications of changing product demand and supply market dynamics in the coming year.

 

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