On Tuesday, Samsung Electronics projected a 35% decline in operating profit for the fourth quarter of 2023, falling significantly short of expectations. The South Korean tech giant anticipates operating profit to reach 2.8 trillion South Korean won ($2.13 billion), marking a considerable drop from the 4.31 trillion won reported during the same period the previous year. The preliminary earnings statement also revealed a 4.9% decrease in fourth-quarter revenue to 67 trillion won compared to a year ago.
Samsung, a major player in the global dynamic random-access memory (DRAM) chip market, faces challenges as semiconductor prices experienced a rebound, offsetting losses in its most profitable segment. The company’s expertise in semiconductor manufacturing has been recognized, but challenges like lower yields compared to competitors like TSMC have impacted earnings negatively, according to Cory Johnson, Chief Market Strategist at The Futurum Group.
Despite the downturn in memory chip prices last year due to excess inventories and weakened demand post-COVID, Samsung expects a recovery as memory prices began rebounding in the fourth quarter of 2023. Production cuts by suppliers and increased demand for mobile and PC devices contributed to this turnaround. Detailed earnings are scheduled to be announced on January 31.
Analysts, including SK Kim from Daiwa Capital Markets, anticipate further price hikes in the first half of 2024, leading to a notable rebound in earnings for memory makers in the latter half of 2024 and into 2025. This optimistic outlook is based on expectations of continued recovery in demand and careful control of supply and output by memory manufacturers.
Galen Zeng, Senior Research Manager of Semiconductor Research at IDC, emphasized the role of increasing demand for artificial intelligence across various applications in driving the recovery of the semiconductor market in 2024. Zeng expects the semiconductor supply chain, covering design, manufacturing, packaging, and testing, to bid farewell to the downturn in 2023.
