Following its earlier-this-month guidance, Samsung Electronics reported a 34.57% decrease in operating profit in the fourth quarter compared to the same period last year.

Samsung’s fourth-quarter performance vs estimates are as follows:

Revenue: 67.78 trillion Korean won, or roughly $51 billion, as opposed to the 69.27 trillion Korean won that LSEG analysts had predicted.

Operating profit: 2.82 trillion Korean won vs LSEG analysts’ expectations of 3.43 trillion Korean won

Samsung experienced a 3.8% decline in revenue and a 34.57% loss in operating profit during the December quarter compared to the same period last year.

Samsung predicted an operating profit of 2.8 trillion South Korean won ($2.13 billion) for the October–December quarter in its earnings outlook earlier this month. This is a 35% decrease from the company’s operating profit of 4.31 trillion won during the same period last year.

Due to “continued strength” in sales of premium display products and a rebound in memory chip pricing, Samsung reported higher revenue and operating profit in the fourth quarter compared to the third.

During its earnings call on Wednesday, Samsung stated, “We will focus on increasing sales of high value-added products to improve profitability.” It promised to meet the growing market need for cutting-edge goods, particularly those focused on generative AI, and to improve the AI features found in smartphones and other products.

When it comes to manufacturing dynamic random-access memory chips, which are used in computers and cellphones, Samsung is the biggest manufacturer in the world.

In a research released on January 9, Daiwa Capital Markets stated that Samsung’s operational profit and revenue projections were “lower than our market estimates.”

Following Samsung’s preliminary earnings, “We assume that memory business earnings improved sharply on increased memory shipment and prices,” stated SK Kim of Daiwa Capital Markets.

Samsung anticipates a “moderate improvement” in its earnings in the first half of 2024, followed by “a more significant improvement” in the second half of the year, provided that global macroeconomic headwinds continue.

Samsung reported lower smartphone sales and profits in the fourth quarter compared to the same period last year, partially due to the “fading effects” of newly released models in the third quarter.

With a 20% market share, Apple surpassed Samsung as the world’s top smartphone supplier in 2023, according to data from international market research firm International Data Corporation.

“Part of that was, frankly, because of a function of how the smartphone market was shifting toward the premium. That’s why Apple was doing well because they’re more concentrated on the premium, whereas Samsung has a broader breadth,” said Bryan Ma, vice president of devices research at IDC.

Although Samsung dropped to the No. 2 spot in the globe, according to Ma, the average selling price of their smartphones grew by almost $100 between 2020 and 2023.

Thus, it’s a good example of how the market has changed to become more premium. That will probably remain one of the factors that propels larger margins going forward, Ma predicted.

Samsung stated that although the premium sector is projected to expand compared to the same period last year, the company anticipates the demand for smartphones to decline in the first quarter owing to seasonality.

In order to increase sales, Samsung announced that it will “leverage” the debut of its new, AI-enabled Galaxy S24 devices on Wednesday.

“We aim to establish Samsung as the leading brand in the AI smartphone market,” said Samsung.

Due to excess semiconductor inventories that corporations accumulated during the pandemic and inflationary pressures that pushed consumers to reduce their purchases of smartphones and PCs, memory chip prices fell precipitously last year.

Due to this, Samsung’s operational profit fell by 77.6% in the third quarter of last year, severely hurting the company’s earnings. Other semiconductor manufacturers have also revealed drops in their quarterly profitability, including SK Hynix and Taiwan’s TSMC.

However, according to global technology market research firm Canalys, the PC market saw a small 3% year-over-year gain in the fourth quarter, marking a return to growth for the industry.

In October, analysts predicted that the memory industry’s sluggish demand had peaked since chipmakers had been reducing production to clear surplus inventory.

“The memory market and demand for IT are expected to continue recovering in 2024, though macroeconomic uncertainties remain to be seen,” said Samsung in a statement on Wednesday.

The company also stated that they will “strengthen its leadership in premium products and competitiveness in advanced-node semiconductors,” as well as grow into markets for consumer items enabled by AI and meet the need for chips in AI applications.

With a plan to begin mass producing 2-nanometer circuits in 2025, Samsung is presently producing 3-nanometer chips. Generally speaking, processors with smaller nanoscale dimensions are more potent and effective.

“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 on Jan. 4.

(Adapted from Crast.net)