Samsung Posts 34.57% Drop in Q4 Operating Profit, Falls Short of Estimates

Samsung Electronics reported a 34.57% drop in operating profit for the fourth quarter compared to the same period a year ago, aligning with the guidance issued earlier. Here’s a breakdown of Samsung’s fourth-quarter results versus estimates:

• Revenue: 67.78 trillion Korean won (about $51 billion), below the 69.27 trillion Korean won expected by LSEG analysts.
• Operating profit: 2.82 trillion Korean won, falling short of the 3.43 trillion Korean won expected by LSEG analysts.

Samsung’s fourth-quarter revenue dropped by 3.8% from the previous year, while operating profit experienced a 34.57% decline. The semiconductor business reported a record loss of 14.88 trillion Korean won for the full year of 2023, compared to a profit of 23.82 trillion Korean won a year earlier, attributed to weak global demand.

Samsung, the world’s largest maker of dynamic random-access memory chips used in devices like smartphones and computers, faced a challenging year in 2023. In the earnings call, Samsung highlighted a recovery in memory chip prices and “continued strength” in sales of premium display products for the improvement in fourth-quarter revenue and operating profit compared to the third quarter.

The company expressed its focus on increasing sales of high-value-added products to enhance profitability. Samsung aims to capture rising demand for advanced products, those targeted at generative AI, and the strengthening of AI functionalities in smartphones and other products.

Despite facing softness in the smartphone business, Samsung expects a moderate improvement in earnings in the first six months of 2024, followed by a more significant improvement in the second half of the year. The company acknowledged a decline in fourth-quarter smartphone sales and profit from the previous quarter, partly due to the fading effects of new models launched in the third quarter.

In 2023, Apple surpassed Samsung as the world’s No. 1 in smartphone shipments, holding a market share of 20%. The shift towards premium smartphones impacted Samsung’s standing, but the company noted an increase in the average selling price of its smartphones.

Samsung anticipates smartphone demand to decline in the first quarter due to seasonality but expects growth in the premium segment compared to the same period last year. The launch of new AI-enabled Galaxy S24 smartphones is intended to boost sales and establish Samsung as a leading brand in the AI smartphone market.

The memory chip industry, hit by declining prices in 2023, is expected to continue recovering in 2024. Samsung plans to meet demand for chips in AI applications, expand into AI-enabled consumer product markets, and strengthen its leadership in premium products and competitiveness in advanced-node semiconductors.

While macroeconomic uncertainties persist, analysts expect further price hikes in the first half of 2024 and a marked rebound in earnings for memory makers in the second half of 2024 and 2025. Daiwa Capital Markets reported that Samsung’s revenue and operating profit estimates were lower than market estimates.

Samsung is currently manufacturing 3-nanometer chips with plans to mass-produce 2-nanometer chips in 2025, aiming for more powerful and efficient chips with a reduction in nanometer size.