Samsung’s Q4 2023 Operating Profit Declines 35% on Semiconductor Price Recovery
Samsung Electronics Co Ltd, the South Korean tech giant, has forecasted a significant decline of 35% in its operating profit for the fourth quarter of 2023. The primary reason for this projected downturn is the recovery in semiconductor prices.
According to reports, Samsung’s operating profit for Q4 2023 is expected to reach 2.8 trillion South Korean won ($2.13 billion), representing a substantial decrease compared to the same quarter the previous year. This estimate falls significantly below the SmartEstimate of 3.7 trillion won by LSEG.
The decline in operating profit also translates to a 4.9% reduction in fourth-quarter revenue year-over-year, totaling 67 trillion won. The main factor behind this decrease is the surge in memory chip prices which began in Q4 2023. The sudden increase in prices can be attributed to production cuts and a spike in demand for mobiles and PCs.
The global technology industry experienced a period of low demand and oversupply of memory chips caused by the COVID-19 pandemic. This led to a significant drop in memory chip prices, severely impacting Samsung’s earnings. In fact, their Q2 operating profit witnessed a staggering 95% decline compared to the previous year.
However, in late October, Samsung and SK Hynix, the world’s second-largest DRAM memory chip maker, hinted that weak demand had reached its lowest point due to production cuts. Analysts anticipate further price increases in 2024, along with a substantial recovery in earnings for memory makers in the coming years.
Despite already experiencing a decline in third-quarter sales and profits, Samsung continued to invest in artificial intelligence (AI) and premium products, hoping for a turnaround. Moreover, the company is set to launch its next flagship smartphone, the Galaxy S24, on January 17. This new offering, with a focus on AI, has the potential to be a game-changer for Samsung’s revenue in the future.
In conclusion, Samsung Electronics Co Ltd anticipates a 35% decline in operating profit for Q4 2023 due to the recovery in semiconductor prices. The surge in memory chip prices, caused by production cuts and increased demand, has resulted in a decrease in fourth-quarter revenue. However, with the projected recovery in earnings for memory makers and upcoming product launches, Samsung aims to navigate these challenges and regain profitability.
