Technology giant Samsung Electronics says it is likely to see its profits for the last three months of 2023 drop fall by more than a third. Samsung profit drop is much worse than analysts expected and comes as global demand for consumer electronics remains weak.
On Tuesday, Samsung Electronics stated it expects to post a 35% drop in operating profit in the fourth quarter of 2023, missing expectations by a wide margin. The Samsung profit drop is seen as a rebound in semiconductor prices likely narrowed losses in the South Korean company’s biggest profit-driving segment.
South Korea-based Samsung is the world’s largest maker of memory chips, smartphones and televisions.
Samsung profit drop
Samsung’s detailed financial earnings for 2023 is scheduled to be released on 31 January.
Samsung estimated that its operating profit dropped to 2.8 trillion won ($2.13bn; £1.76bn) in the October-December quarter of 2023. Samsung profit drop was about 35% lower compared to the same period in 2022. Operating profit was 2.43 trillion won in the previous quarter.
Fourth-quarter revenue likely fell 4.9% from the same period a year ago to 67 trillion won, the firm said in a preliminary earnings statement.
Samsung earnings 2023 is much less than the roughly 3.7 trillion won expected by technology industry analysts.
″[Samsung is] very good at making some of the best semiconductors in the world, at least in making them and getting them done. But their yields are so much worse than competitors like TSMC,” ″… so bad yields can turn into really bad earnings results said Cory Johnson, chief market strategist at The Futurum Group, on Tuesday.
Memory prices drop
Demand for electronic gadgets and the memory chips that go in them ramped up during Covid lockdowns as consumers bought new devices to use at home.
However, Samsung memory chip prices dropped sharply last year. This was because of a buildup of large stocks of the key electronic components in the wake of the pandemic, and slower sales for devices such as laptops and mobile phones.
That had a major impact on Samsung’s earnings as it saw its operating profit for the third quarter of 2023 drop by more than 77% compared to the same period a year earlier.
In the previous quarter, the same measure of profitability plunged by 95%, which triggered Samsung to cut the number of memory chips it planned to make.
“We are lowering the production of memory chips by a meaningful level, especially that of products with supply secured,” the company said at the time.
Possibility of a rebound for memory chip
“We estimate memory prices started to rebound from 4Q23, driven by production cuts by suppliers and a recovery in demand for mobile and PC,” said SK Kim, analyst at Daiwa Capital Markets, in a Jan. 4 report.
In late October, Samsung and SK Hynix – the world’s second-largest DRAM memory chip maker – signaled during their third quarter earnings calls that weak demand may have finally bottomed out following production cuts.
“We expect further price hikes in 1H24 and a marked rebound in earnings for memory makers in 2H24 and 2025,” said Kim of Daiwa Capital Markets, referring to the first and second half of this year.
“As such, we anticipate tailwinds for share prices in the near term.”
CES trade show
Samsung’s warning on Tuesday comes as CES, the world’s biggest consumer technology trade show, gets underway in Las Vegas.
As well as being a shop window for the latest innovations, it also marks an annual gathering of the biggest players in the technology industry.
Around 130,000 visitors and 4,000 exhibitors are expected at this year’s event.
