Samsung reports a 34.57% decline in Q4 operating profit

Samsung Electronics, the world’s leading producer of dynamic random-access memory chips, has reported a 34.57% decrease in its operating profit for the fourth quarter compared to the previous year. This decline is consistent with the company’s guidance issued earlier this month. The fourth-quarter results indicate a challenging period for Samsung despite its prominent position in the market.

Samsung reports a 34.57% decline in Q4 operating profit

Samsung Electronics has released its fourth-quarter financial results, revealing revenue of 67.78 trillion Korean won (approximately $51 billion), a figure falling short of the expected 69.27 trillion Korean won estimated by LSEG analysts. Operating profit for the same period amounted to 2.82 trillion Korean won, notably below the projected 3.43 trillion Korean won anticipated by financial analysts.

These results reflect a 3.8% decrease in revenue from the previous year’s fourth quarter, coupled with a significant 34.57% decline in operating profit. The report underscores the challenges faced by Samsung as it grapples with evolving market dynamics and strives to maintain its prominent position in the technology industry. In its earlier earnings guidance, Samsung predicted that operating profit for the October-December quarter would reach 2.8 trillion South Korean won ($2.13 billion), marking a 35% decline from the same period the previous year when the firm reported an operating profit of 4.31 trillion won.

Samsung attributed its improved fourth-quarter revenue and operating profit to the recovery in memory chip prices and the “continued strength” in sales of premium display products. Samsung emphasized its commitment to increasing sales of high-value-added products to enhance profitability. The company aims to cater to the rising demand for advanced products and those incorporating generative AI. Additionally, Samsung plans to strengthen AI functionalities in its smartphones and other product offerings.

Samsung reported a decline in smartphone sales and profit in the fourth quarter, partially due to the diminishing impact of new models launched in the previous quarter. In 2023, Apple surpassed Samsung as the world’s top smartphone vendor with a 20% market share. This shift was attributed to Apple’s concentration on premium devices, while Samsung offers a broader range of products.

Despite challenges faced in the memory chip market, Samsung expects a recovery in 2024. The memory chip industry experienced a significant downturn due to inflationary pressures, reduced consumer demand for smartphones and PCs, and excess chip inventories. However, the global PC market showed modest growth of 3% in the fourth quarter, suggesting a potential turnaround. Samsung aims to meet the demand for chips in AI applications and expand into AI-enabled consumer product markets while enhancing its position in premium products and advanced-node semiconductors.

Samsung is currently manufacturing 3-nanometer chips, with plans to mass-produce 2-nanometer chips by 2025. Reducing the nanometer size can lead to more powerful and efficient chips. Analysts expect further price increases in the first half of 2024, with a substantial rebound in earnings for memory makers in the latter half of 2024 and 2025.

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