Samsung plans to keep up chip spending despite 2022 profit plunge

31 Jan 2023

Image: © PX Media/

The tech giant plans to keep spending in its semiconductor and smartphone businesses, as it expects demand to start recovering later this year.

Samsung Electronics has revealed plans to maintain its spending for the upcoming year, despite hitting a slump in quarterly profits at the end of 2022.

The company said its profits dropped to 4.3trn won for the fourth quarter of 2022, confirming the bleak statement the company shared at the start of the year.

This marks a drop of more than two-thirds compared to the same period in 2021 and is Samsung’s smallest quarterly profit since 2014.

Speaking on the slump, Samsung said the business environment deteriorated “significantly” towards the end of 2022 due to weak demand, as the world faces an economic slowdown.

The smartphone and memory chip maker said multiple divisions saw profits decline toward the end of 2022 as customers adjusted their inventories. Its semiconductor business earned 270bn won in the fourth quarter of the year.

Pushing forward to recovery

Samsung said it expects economic uncertainties to persist in 2023, but it anticipates a recovery in demand towards the second half of the year.

For this reason, the company gave no hint that it would reduce spending and said its semiconductor sector will continue to address demand for “high-end products”.

“Although demand recovery momentum in the short-term is concern[ing], Samsung will continue to minimize any adverse impacts by actively addressing the demand for high-end products,” Samsung said regarding its semiconductor business.

In contrast, semiconductor maker TSMC warned earlier in January that it plans to prudently manage its business and cut spending where appropriate, Reuters reports.

The company said it also plans to “expand its leadership” in the smartphone market with the upcoming launch of its Galaxy S23.

While Samsung anticipates a drop in smartphone demand this year, it expects this to negatively impact “mass-market models”. The company predicts the demand for premium smartphones and tablets will stay “relatively solid” in 2023.

Choi Yoo-june, an analyst at Shinhan Securities, said Samsung may be seeing this time as a good opportunity to increase its market share for long-term benefits, Reuters reports.

Samsung’s decision to push ahead with spending comes during a period of economic slowdown across the tech sector, as many other companies plan to tighten their belts and cut costs.

Last week, Intel CEO Pat Gelsinger said in an earnings call that the company had “stumbled” and “lost momentum”, but believes the company will stabilise this year as it pursues a cost-cutting strategy.

In January alone, tech companies such as Microsoft, Alphabet, SAP, IBM, Spotify, Amazon and Salesforce have confirmed plans to reduce their staff numbers.

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Leigh Mc Gowran is a journalist with Silicon Republic