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Samsung Electronics is poised to experience a 35% downturn in operating profit between October to December 2023 (Q4), according to preliminary results released by the company today. This marks the sixth consecutive quarter of declining operating profit, signalling challenges emanating from subdued consumer demand.
According to Samsung’s quarterly guidance, the expected operating profit for Q4 stands at 2.8 tn won ($2.12 bn), a fall from the previous year’s 4.31 tn won ($3.26 bn). The reported figures fell notably short of market expectations of 3.9 tn won. Additionally, the company’s Q4 revenue is projected to be around 67 tn won ($50.83 bn), marking a 4.9% decline from the previous year.
Meanwhile, Samsung has indicated a potential 15.2% upswing in Q4 profits from the preceding quarter, accompanied by a 0.6% decrease in revenue. For the entirety of 2023, Samsung expects its operating profit to have declined by 84.9% year-on-year to 6.54 tn won ($4.96 bn). The anticipated decline in revenue during the same timeframe is expected to be 14.6% year-on-year, reaching 258.2 tn won ($195.89 bn).
As per a regulatory filing, the company is scheduled to disclose comprehensive financial results on January 31, 2024.
In a text message to reporters, Samsung attributed the poor performance in the system semiconductor sector to slow smartphone demand. “Improvement in foundry operations was insufficient as well. In memory, performance improved significantly from the previous quarter as we dealt with rising demand for advanced products,” the company added.
Looking ahead, Samsung is looking to seize opportunities arising from increased demand propelled by artificial intelligence (AI). The company is set to unveil its first AI smartphone in the U.S. this month. Among other notable initiatives in 2024, Samsung aims for a 2.5-fold expansion of its annual High Bandwidth Memory (HBM) capacity.
Samsung Electronics quarterly performance affected by memory chip prices
Samsung Electronics faced a substantial blow to its earnings as memory chip prices experienced a decline throughout much of the past year. This downturn was fueled by weak demand for key products such as smartphones and laptops after the Covid-19 pandemic.
Accordingly, Samsung saw its operating profit drop by 78% in the period between July to September 2023. And in the three months before that, the company’s profits shrank by 95%. In total, Samsung’s semiconductor unit incurred a loss of 12.7 tn won ($9.62 bn) during the initial three quarters of the previous year.
However, in late October of last year, Samsung and the world’s second-largest DRAM memory chip maker, SK Hynix, hinted at a potential bottoming out of weak demand following strategic production cuts.
Along these lines, memory chip prices witnessed a surge in the three months ended December 2023. As per data from TrendForce, mobile DRAM chip prices surged by an estimated 18% to 23% during Q4, while mobile NAND flash chip prices rose by 10% to 15% during the same period.
This coincides with the fact that the quarterly drop in Samsung’s profit’s during the same period was the smallest in five quarters. Analysts suggest that Samsung’s chip division likely reduced its Q4 loss compared to the previous two quarters, with improvements in memory chip earnings as the DRAM business returned to profitability.
All in all, industry experts maintain optimism for a broader semiconductor sector recovery in 2024. “…AI across all major applications will drive the overall semiconductor sales market to recover in 2024,” says Galen Zeng, Senior Research Manager, Semiconductor Research, IDC Asia/Pacific.
“The semiconductor supply chain, including design, manufacturing, packaging, and testing, will bid farewell to the downturn in 2023,” he adds.
