Samsung, the South Korean tech giant, reported a significant decline in its quarterly profit, marking its lowest in 14 years. The company’s global decline in microchip demand slowed sales and profits, leading to a 95% drop in operating profit from a year earlier. Samsung also reported an 87.4% slump in net income for the first quarter of 2023 compared to the same quarter last year. The chip division of Samsung recorded its first operating loss since 2009, reporting approximately €3 billion in losses.

The decline in Samsung’s profit is attributed to slowing consumer spending on electronics, coupled with an excess in microchip production that fails to match slowing demand. During the two years of the pandemic, there was almost unprecedented demand for memory chips, with worldwide lockdowns fueling smartphone and computer sales. This created a global shortage and an uptick in memory chip production. However, as lockdowns receded and global inflation increased, computer sales dropped again, causing chip prices to fall as demand shrinks. Memory chips usually account for about half of Samsung’s profits.

Samsung expects memory chips’ demand to “gradually recover” in the second half of 2023, citing forecasts of declining customer inventory levels. The company owed its slowed profit to weakened demand for memory chips, as the end of lockdown diminished previous demand for new computers and smartphones.

The decline in Samsung’s profit is not just an isolated case but is part of a broader trend in the tech industry, where the global supply chain has been disrupted by the pandemic, leading to shortages and rising prices. The situation has been further compounded by rising geopolitical tensions and the US-China trade war, which has caused disruptions in global trade and commerce.

To address the growing demand for memory chips, Seoul announced last month that it would build the biggest chip center in the world, using approximately $230 billion or €220 billion of private investment from Samsung over the next 20 years. The move is expected to create thousands of jobs and help South Korea maintain its lead in the global technology race.

In conclusion, the decline in Samsung’s profit highlights the challenges faced by the tech industry in the wake of the pandemic, geopolitical tensions, and the US-China trade war. While the situation is expected to improve in the coming months, the industry must find innovative solutions to address the disruptions in the global supply chain and ensure sustainable growth in the long run.