Samsung Electronics reported smaller-than-expected operating profits for the second quarter as higher inflation dampened consumer demand for mobile phones and other electronics gadgets.

Operating profit for the world’s biggest smartphone and memory chipmaker was estimated at Won14.1tn ($10.73bn) in the April-June period, up 12 per cent from a year earlier. It marked the company’s highest second-quarter profit in four years but was lower than a Won14.5tn forecast in a Refinitive SmartEstimate. Sales likely increased 22 per cent year on year to Won77.8tn.

The company is bracing for tougher times ahead as consumers tighten belts amid rapid price hikes worldwide, following the pandemic-era boom in the tech sector over the past two years.

Analysts have recently revised down the South Korean tech giant’s earnings forecasts as consumers and businesses are likely to reduce spending amid concern that the global economy will slip into recession.

Demand from server customers remained strong in the second quarter but mobile phone sales fell. Several chipmakers including Micron Technology and Advanced Micro Devices have signalled falling demand while Micron last week gave a surprisingly downbeat forecast for the current quarter, citing weak demand for smartphones and computers.

Research group Gartner forecast global mobile phone sales would fall 7.1 per cent this year, citing inflation, the war in Ukraine and supply chain problems worsened by Covid-19 lockdowns in China. The group also expects worldwide personal computer shipments to drop 9.5 per cent this year.

Samsung shares have fallen about 26 per cent so far this year, underperforming a 22 per cent decline in the Kospi, the country’s benchmark.

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