The global economic slowdown has caused a drop in demand for electronic devices and the memory chips that power them. As a result, the tech giant Samsung has warned that its profits will drop by 32%.
The South Korean company thinks its operating profit for the last quarter was about 10.8 trillion ($7.6 billion or £6.9 billion). On Thursday, Advanced Micro Devices (AMD), a US chip maker, also said that computer demand had dropped. People are shopping less because the cost of living is going up.
Samsung’s profits from making microprocessors went down when the price of memory chips fell worldwide because demand for consumer electronics went down. The estimates are for the three months ending in September. This is the first time in almost three years that Samsung’s quarterly profits have decreased from last year.
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However, AMD’s revenue predictions for the third quarter were approximately a billion dollars (or 895.6 million pounds) less than what was initially predicted, which indicates that the decline in demand for chips may be much worse than expected.
Lisa Su, the chief executive of AMD, stated that the market for personal computers (PCs) experienced a considerable decline during the quarter. She went on to say that demand was lower than anticipated because of the poor economic situation. During the after-hours trading session in New York, shares of AMD experienced a decline of 4.5 per cent.
According to Neil Shah, an analyst at the market research company Counterpoint Research, who spoke with the BBC, “This is going to be a recurrent theme for corporations in the second half of 2022 due to diminishing consumer demand,”
As a result of growing prices, higher interest rates, and the repercussions of Russia’s invasion of Ukraine, fewer people are making purchases, which has negatively influenced electronic equipment sales.
Because of this, businesses that acquire memory chips, such as those that make cellphones and personal computers, have reduced the number of memory chips they buy as they work through their existing supplies.
Memory chip prices are projected to decline steeply over the next three months as smartphone sales decline, with demand not expected to begin recovering until early in the new year. Analysts working in the technology industry have made this projection.
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