South Korea’s two flagship tech companies announced their operating earnings would drop at an alarming pace, shedding light on the worsening market conditions and greater economic risks this year.

Samsung Electronics, the world’s largest memory chip and smartphone maker, said Friday its fourth-quarter profit plummeted 69 percent from a year earlier, hurt by a fall in memory chip prices and sluggish demand for devices.

Samsung’s October-December operating profit stood at 4.3 trillion won ($3.4 billion), down 13.87 trillion won from the year-earlier period. It is the first time in eight years that Samsung posted a quarterly operating income of less than 5 trillion won. Samsung’s sales for the fourth quarter were expected to fall 8.6 percent on-year to 70 trillion won.

Samsung said in a statement that its weak earnings come as chip sales plunged due to lower demand from server clients, data centers and handset makers amid deepening uncertainty in the market environments.

The steep drop in Samsung’s operating profit and sales prompted market watchers here to call the latest announcement an “earnings shock.”

Similarly, LG Electronics, the country’s No. 2 home appliance maker, announced a sharp drop in earnings. The company said Friday its fourth-quarter operating profit would drop to 65.5 billion won, down a whopping 91.2 percent from a year earlier, though its revenue rose 5.2 percent to 21.85 trillion won in the same period.

LG, known for its cutting-edge OLED TV and computer monitors as well as popular home appliances, is said to have suffered a setback in earnings due to a rise in raw material prices in line with the weakening Korean currency, among a host of negative factors.

The fall in earnings of Samsung and LG in the most recent quarter was widely expected. But the pace of the drop was clearly above market expectations, adding to fears that their performance in coming quarters might be gloomier than previously forecast.

Given that Samsung and LG are viewed as barometers of market trends in their respective sectors, the drop in their earnings is a negative sign for Korea, whose economy is already saddled with a slew of challenges including stubbornly high inflation, sluggish domestic consumption and rising interest rates.

While the overall economic outlook appears murky, Samsung confronts a particularly challenging market condition ahead. Samsung, whose sales of chips abroad plays a significant role in the country’s export drive, is expected to see a further drop in chip prices.

According to market researcher TrendForce, the prices for dynamic random access memory and NAND flash memory would fall by up to 15 percent in the first quarter of this year.

Export-Import Bank of Korea forecast the country’s chip export would shrink by 11.5 percent this year, compared with 2022. A host of economic research institutes recently slashed Korea’s economic growth rate to the 1 percent range.

Given that semiconductor products are estimated to account for about 20 percent of Korea’s total exports, the falling chip prices are feared to hurt not only Samsung’s earnings but also the country’s growth engine.

Despite the gloomy outlook, policymakers should pay more attention to the latest developments in the global chip market, especially concerning moves that support local chip industries and enhance the competitiveness of chipmakers.

For instance, eight Japanese companies including Toyota Motor, Sony and Softbank launched a joint company to develop next-generation semiconductors. The US is feverishly attracting chip facility investment from abroad, including Korea, while the EU is stepping up efforts to shore up its own chip industry.

Against this backdrop, Korean chipmakers and IT companies are required to diversify their strategic fields. Samsung, which has long safeguarded its leadership in memory chips, should broaden its chip product portfolio further to artificial intelligence and autonomous driving solutions.

In this regard, policymakers have to make more efforts to remove regulations to drive innovation. After all, proactive investment to develop new technology is the key to staying ahead in fast-changing markets.