In a recent development, South Korean tech titan Samsung Electronics Co Ltd SSNLF forecasted a 35% fall in its operating profit for the fourth quarter of 2023. This projected decline is primarily due to a recovery in semiconductor prices.
What Happened: Samsung’s operating profit for Q4 2023 is expected to be 2.8 trillion South Korean won ($2.13 billion), a 35% decrease from the same quarter the previous year. This estimate is considerably lower than the SmartEstimate of 3.7 trillion won by LSEG, according to a report by CNBC.
This downturn also amounts to a 4.9% decline in fourth-quarter revenue year-over-year, to 67 trillion won, largely due to increased memory chip prices. The surge in prices began in Q4 2023, following production cuts and a spike in demand for mobiles and PCs.
Memory chip prices had dipped due to an oversupply and weak demand for end products like smartphones and laptops after the COVID-19 pandemic. This drop severely impacted Samsung’s earnings, with their Q2 operating profit falling by 95% year-over-year.
In late October, Samsung and SK Hynix, the world’s second-largest DRAM memory chip maker, indicated that weak demand may have reached its lowest point due to production cuts. Analysts predict further price increases in 2024 and a significant recovery in earnings for memory makers in the following years.
Why It Matters: Samsung had already experienced a decline in third-quarter sales and profits. Despite this, the company continued to invest in AI and premium products in hopes of a turnaround.
Moreover, Samsung is set to launch its next flagship smartphone, the Galaxy S24, on Jan. 17. The new offering, focusing on AI, could be a game-changer for the tech giant’s revenue in the coming years.
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