Samsung Electronics, the flagship subsidiary of South Korean conglomerate Samsung Group, reported a sharp drop of 34.57 percent in operating profits for the fourth quarter of 2023. The company attributed this decline to weak demand for consumer devices. In a statement, Samsung revealed that operating profit for the period from October to December was 2.82 trillion won ($2.1 billion), a decrease from 4.31 trillion won in the previous year. Sales for the same period dipped 3.8 percent to 67.78 trillion won, and net profit dropped 73.4 percent to 6.34 trillion won.
As one of the largest manufacturers of memory chips and smartphones in the world, Samsung expressed optimism for 2024, with an expectation of gradual recovery in demand for smartphones and PCs. The company believes that advanced processes will help drive the foundry market to levels seen in 2022. However, Samsung noted potential obstacles such as interest rate policies and geopolitical issues that could impact growth in 2024. Nevertheless, the company remains positive about its outlook.
Samsung is among the few global companies that produce premium high-bandwidth memory chips tailored for artificial intelligence processors. The company recently released its latest Galaxy smartphones with new AI features as it seeks to regain its position as the world’s largest phone seller, currently held by Apple. Samsung’s earnings report follows the announcement by SK Hynix, the second-largest memory chip maker globally, that it returned to profit after four consecutive quarters of losses.
Sam Altman, CEO of OpenAI, the creators of ChatGPT, reportedly met with leaders from Samsung and SK Hynix during a visit to South Korea. The country has plans to build the world’s largest chip center using $230 billion of private investment, primarily from Samsung Electronics. The growing demand for artificial intelligence and generative AI is driving the need for advanced semiconductor systems, including memory chips.
Neil Shah, Vice President of Counterpoint Research, stated that Samsung’s earnings results reflect a slower recovery than initially expected. However, positive trends such as increasing DRAM prices and a resurgence in the smartphone market contribute to an optimistic outlook. Shah believes that Samsung is well-positioned to thrive in the evolving market conditions.
In addition to the decline in operating profits, Samsung also reported a significant drop of 84.85 percent in full-year profits for 2023 compared to the previous year. South Korean chipmakers, led by Samsung, experienced record profits in recent years, but the global economic slowdown has adversely affected memory chip sales. However, the global semiconductor market is predicted to recover in 2024, with an estimated growth of 11.8 percent according to World Semiconductor Trade Statistics.
Despite the challenges, industry experts believe that Samsung’s overall operating performance will improve this year as demand and supply reach a better balance. Gloria Tsuen, Vice President and Senior Credit Officer at Moody’s Investors Service, emphasized that Samsung’s large net cash position provides a strong financial buffer. As the market gradually rebounds, Samsung’s prospects are expected to improve.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
