The Samsung logo displayed on a phone screen with a binary code reflected on it, a laptop keyboard, a memory card, an adapter and cables are seen in this illustrative photo taken in Krakow, Poland on January 30, 2023. (Photo Jakub Porzycki/NurPhoto via Getty Images)
Jakub Porzycki | Nurphoto | Getty Images
Samsung Electronics on Wednesday reported a 34.57 percent drop in operating profit in the fourth quarter from a year earlier, according to its guidance issued earlier this month.
Here are Samsung’s Q4 results versus estimates:
- Income: 67.78 trillion Korean won (about $51 billion), versus 69.27 trillion Korean won expected by LSEG analysts
- Operating profit: 2.82 trillion Korean won, vs. 3.43 trillion Korean won were expected by analysts at LSEG
Samsung’s revenue for the quarter ended in December fell 3.8 percent from a year earlier, while operating profit fell 34.57 percent over the same period.
For the full year 2023, the semiconductor business fell to a record loss 14.88 trillion Korean won, from a profit of 23.82 trillion Korean won a year earlier due to weak global demand, LSEG data showed.
Samsung is the world’s largest manufacturer of dynamic random access memory chips found in consumer devices such as smartphones and computers.
In earnings guidance earlier this month, Samsung said it expected operating profit for the October-December quarter to be 2.8 trillion South Korean won ($2.13 billion), down 35 percent from the same period a year ago. from a year ago, when the company reported operating profit of 4.31 trillion. won.
Samsung said its fourth-quarter revenue and operating profit improved from the third quarter due to a recovery in memory chip prices and “continued strength” in sales of high-end display products.
“We will focus on increasing sales of high-value-added products to improve profitability,” Samsung said in its earnings call on Wednesday. It said it will capture the growing demand for advanced products and those aimed at building artificial intelligence, as well as boosting AI functions in smartphones and other products.
Daiwa Capital Markets in a Jan. 9 report said Samsung’s revenue and operating profit estimates were “lower than our market estimates.”
“We assume that memory business profits improved sharply due to the increase in memory shipment and prices,” SK Kim of Daiwa Capital Markets said after Samsung’s preliminary earnings.
As global macroeconomic headwinds persist, Samsung expects its earnings in the first half of 2024 to show “modest improvement” followed by “more significant improvement” in the second half of the year.
Simplicity in the smartphone business
Samsung said smartphone sales and profits for the fourth quarter fell from the previous quarter, partly due to “weakening” of new models launched in the third quarter.
In 2023, Apple beat Samsung as No. 1 in the world in terms of smartphone shipments, holding a 20% market share, according to data from global market research firm International Data Corporation.
“Part of that was, frankly, a function of how the smartphone market was shifting to premium. That’s why Apple was doing well because it’s more premium-focused, while Samsung has more range,” Bryan said. Ma. , vice president of device research at IDC, on CNBC’s “Squawk Box Asia” on Wednesday.
Ma said that while Samsung fell to No. 2 in the world, the average selling price of its smartphones increased by about $100 from 2020 to 2023.
“So it’s very representative of how the market has shifted towards premium. I think as we go forward, that will continue to be one of the things that drives higher margins,” Ma said.
In the first quarter, Samsung expects smartphone demand to decline due to seasonality, but said the premium segment is likely to grow compared to the same period last year.
Samsung has said it will “leverage” its new AI-enabled Galaxy S24 smartphones, which are will start on Wednesdayto boost sales.
“Our goal is to establish Samsung as the leading brand in the AI smartphone market,” Samsung said.
Memory recovery will continue in 2024
Memory chip prices fell sharply last year due to inflationary pressures that caused consumers to cut back on smartphone and computer purchases, as well as excess chip inventories that companies built up during the pandemic.
This has hit Samsung’s profits hard, along with it Operating profit fell 77.6% in the third quarter from a year earlier. Other chip makers such as Taiwan TSMC and SK Hynix also reported declines in quarterly profits.
But the The global PC market has returned to growth in the fourth quarter, posting modest annual growth of 3%, according to global technology market analyst firm Canalys.
Analysts told CNBC in October that weak demand in the memory industry has bottomed out as chipmakers burn off excess inventory through production cuts.
“The memory market and IT demand are expected to continue to recover in 2024, although macroeconomic uncertainties remain,” Samsung said in a statement on Wednesday.
The company added that it will meet demand for chips in AI applications, expand into AI-enabled consumer product markets as well as “strengthen its leadership in premium products and competitiveness in advanced node semiconductors.”
Samsung currently makes 3-nanometer chips, but has a roadmap to mass-produce 2-nanometer chips in 2025. Typically, a reduction in nanometer size can yield more powerful and efficient chips.
“We expect further price increases in 1H24 and a notable recovery in earnings for memory makers in 2H and 2025,” Daiwa Capital Markets’ Kim said on Jan. 4.