Samsung Electronics Co Ltd announced a likely 35% loss in fourth-quarter operating profit on Tuesday, considerably worse than experts expected, as sluggish consumer demand remained in many of its businesses despite rising memory chip prices.

The world’s top memory chip, smartphone, and TV maker said its operating profit decreased to 2.8 trillion won ($2.13 billion) in October-December from 4.31 trillion won the previous year.

The result fell short of the LSEG SmartEstimate of 3.7 trillion won, which is weighted towards estimates from more consistently correct analysts.

Lower-than-expected profits from Samsung’s chip contract manufacturing, mobile processors, television, and home appliance sectors may have caused the company to fall short of expectations, analysts said.

Rival LG Electronics reported a fourth-quarter operating profit of 313 billion won, considerably below expectations, due to increased competition and marketing investment in the television and home appliance markets to boost consumer demand, which has been hampered by high inflation.

“The only thing that has improved is memory chips, and that’s because Chinese PC and mobile makers began restocking memory chips in fourth quarter after using up their own stocks for so long,” said Lee Min-hee, analyst at BNK Investment & Securities.

“Consumer demand is still not great, and unless interest rates are lowered and the economy stimulated, it may not improve much.”

Analysts estimate that Samsung’s mobile business saw shipments of its two flagship foldable models fall by roughly 1 million units each compared to the third quarter, resulting in a modest drop in earnings.

Despite being worse than predicted, this is Samsung’s smallest on-year earnings decrease in five quarters, following a 31% drop in the third quarter of 2022 due to a memory chip glut created by poor demand for gadgets last year.

Analysts believe Samsung’s semiconductor division reduced its fourth-quarter deficit from 4.36 trillion won and 3.75 trillion won in the second and third quarters, as memory chip revenues improved and the DRAM sector returned to profitability.

Memory chip prices are projected to recover this year, as they did in the December quarter following production cuts, and this trend is expected to continue.

According to data source TrendForce, mobile DRAM chip costs increased by an estimated 18%-23% in the fourth quarter, while mobile NAND flash chip prices increased by 10%-15%.

Samsung Electronics shares opened up 1.2% but reduced gains to trade 0.1% higher on Tuesday morning, compared to a 0.6% increase in the broader market.

The company is scheduled to report detailed earnings on January 31.

“Later this month, investors will be interested to hear Samsung’s plans that will drum up demand for more memory chips per device, such as on-device artificial intelligence,” Lee said.

(Adapted from CNBC.com)