Image: Samsung

Samsung saw its profit drop substantially during the fourth quarter from poor sales of memory chips and the continued slowdown in growth in the smartphone market.

The South Korean tech giant said on Tuesday that it recorded 4.31 trillion won in operating income and 70.46 trillion won in revenue in the fourth quarter of 2022. Operating income dipped 69% year-on-year and revenue dropped by 8% over the same time period.

Samsung's chip business, or the Device Solutions Business, its usual cash cow, contributed a meager 270 billion won in operating income __ essentially barely breaking even.

The company said it saw unit prices of memory chips drop significantly from the valuation loss of its inventory while customers also bought fewer chips to adjust their own inventories.

Samsung isn't the only memory chipmaker feeling the brunt of this price drop; Micron reported a net loss of$195 million in its latest fiscal quarter and SK Hynix is also expected to report an operating loss.

Meanwhile, Samsung's consumer electronics business, or the Device Experience Business, also performed poorly, recording 1.64 trillion won in operating income.

For its mobile business, the company said it saw both revenue and profit drop due to the overall slowdown in smartphone sales and weak demand for low- and mid-tier smartphones.

But Samsung Display, Samsung's display panel maker, performed solidly, contributing 1.82 trillion won. The unit focused on high-end smartphone products despite market demand continuing to contract, Samsung said.

The South Korean tech giant didn't directly mention its customers but the high profit likely comes from solid sales of Apple's iPhone 14 series, which uses OLED display panels made by Samsung Display.

For the entire year of 2022, despite its weak fourth-quarter earnings, Samsung recorded 302.23 trillion won in revenue, an increase of 8% from a year ago. Operating income was 43.38 trillion won, a drop of 8% year-on-year, despite the global economic downturn and the Russia-Ukraine war.

For 2023, Samsung said that while macroeconomic uncertainties will persist, consumer demand is expected to start recovering during the second half of the year.

For chips, it will focus on advanced nodes and products, while in smartphones it expected demand to continue to polarize between premium and low-tier smartphones, meaning demand for high-priced phones will continue.

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