Samsung warns fourth-quarter profit could plunge 35%, misses expectations

Samsung
Electronics
on
Tuesday
said
it
expects
to
post
a
35%
drop
in
operating
profit
in
the
fourth
quarter
of
2023,
missing
expectations
by
a
wide
margin
as
a
rebound
in
semiconductor
prices
likely
narrowed
losses
in
the
South
Korean
company’s
biggest
profit-driving
segment.

Samsung
said
that
for
the
October-December
quarter,
operating
profit
is
likely
to
be
2.8
trillion
South
Korean
won
($2.13
billion),
down
35%
from
the
same
period
a
year
ago
where
the
firm
reported
an
operating
profit
of
4.31
trillion
won.

Operating
profit
was
2.43
trillion
won
in
the
previous
quarter.

The
profit
guidance
fell
far
short
of
LSEG’s
SmartEstimate
of
3.7
trillion
won,
which
is
weighted
more
heavily
toward
expectations
of
analysts
who
have
been
consistently
more
accurate.

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
is
the
world’s
largest
maker
for
dynamic
random-access
memory
chips
which
are
found
in
consumer
devices
such
as
smartphones
and
computers.

“[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,”
said
Cory
Johnson,
chief
market
strategist
at
The
Futurum
Group,
on
Tuesday.

“…
so
bad
yields
can
turn
into
really
bad
earnings
results,”
he
told
CNBC’s
“Squawk
Box
Asia”
after
Samsung’s
earnings
preview.

The
company
is
set
to
announce
detailed
earnings
on
Jan.
31,

according
to
a
filing.

Memory
chip
prices
fell
drastically
last
year,
as
a
result
of
excess
inventories
post-Covid
and
weak
demand
for
end
products
like
smartphones
and
laptops.

“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.

This
has
hit
Samsung’s
earnings
hard.
Samsung’s

third
quarter
operating
profit
plunged
77.6%
from
a
year
ago,
even
though
it
came
in
better
than
expected.
Operating
profit
in
the
second
quarter

slumped
by
95%
compared
to
the
same
period
a
year
ago.

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.”

Memory
chip
prices
have
started
increasing
since
the
start
of
November,
thanks
to
“memory
manufacturers’
strict
control
of
supply
and
output,”
according
to
Galen
Zeng,
senior
research
manager
of
semiconductor
research
at
IDC.

“The
demand
for
AI
across
all
major
applications
will
drive
the
overall
semiconductor
sales
market
to
recover
in
2024,”
said
Zeng
in
a

Dec.
21
report.

“The
semiconductor
supply
chain,
including
design,
manufacturing,
packaging,
and
testing,
will
bid
farewell
to
the
downturn
in
2023.”