Samsung Reports Sharp Drop In Operating Profits
Samsung Electronics on Wednesday reported a 34.57% decline in operating profit for the fourth quarter of 2023 as the company grapples with weak demand for consumer devices.
The company is the flagship subsidiary of South Korean giant Samsung Group, the largest of the family-owned conglomerates that dominate business in Asia's fourth-largest economy.
Operating profit was 2.82 trillion won ($2.1 billion) in the October-December period, down from 4.31 trillion won a year earlier, Samsung said in a statement.
In the last three months of 2023, revenue fell 3.8% to 67.78 trillion won, and net profit of 6.34 trillion won was 73.4% lower than a year earlier.
The company, one of the world's largest makers of memory chips and smartphones, blamed weak demand but offered an optimistic outlook for 2024.
“As demand for smartphones and computers gradually recovers in 2024, advanced processes are expected to push the foundry market closer to 2022 levels,” he said.
Samsung said there were "several potential headwinds, including interest rate policy and geopolitical issues" that could impact growth in 2024, but it remained optimistic.
Samsung is one of the two largest memory chip manufacturers in the world and one of the few companies in the world that produces high-quality, high-bandwidth memory (HBM) chips designed specifically for artificial intelligence processors.
Earlier this month, the company launched its latest Galaxy smartphones with new artificial intelligence features as it aims to reclaim its place as the world's largest seller of Apple phones.
Samsung's data comes after South Korea's SK Hynix, the world's second-largest memory chip maker, said this month it had returned to profit after four straight quarters of losses.
OpenAI CEO and ChatGPT creator Sam Altman met with executives from Samsung and SK Hynix in South Korea last week, Seoul-based Yonhap news agency reported.
Last year, South Korea announced it would build the world's "largest" chip processing center with $230 billion in private investment, mostly from Samsung Electronics.
"Significant demand for artificial intelligence, and especially generative artificial intelligence, is driving significant demand for advanced semiconductor systems, from computing to data storage," Neil Shah, vice president of Counterpoint Research, told AFP.
The company's earnings results reflect a "slower recovery than initially expected," but several positive trends such as rising DRAM prices and a recovery in the smartphone market add to the optimism of the outlook, Shah said.
“Samsung is strategically positioned to thrive in an ever-changing market environment.”
The company's shares fell 1.08% in morning trading in Seoul.
- Cash reserve -
The company also reported earnings for 2023 on Wednesday. Operating profit for the year was 6.57 trillion won, down 84.85% year-on-year.
South Korean chipmakers led by Samsung have enjoyed record profits in recent years thanks to rising prices for their products, but the global economic downturn has weighed on sales of memory chips.
However, World Semiconductor TradeStatistics estimates that the global semiconductor market will recover in 2024, growing by 11.8%.
"Now that memory chips have just emerged from a deep crisis, Samsung's overall operating performance will improve this year" as "supply and demand reach a better balance," said Gloria Tsuen, vice president and head of credit ratings at Moody's Investors Service. .
"Samsung has a large net cash position, which provides a strong financial cushion."
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