Samsung is the world's largest memory chip maker.
Jakub Purzycki | norphoto | Getty Images
Samsung Electronics said on Tuesday it expects a 35% decline in operating profit in the fourth quarter of 2023, missing expectations by a large margin as a rebound in semiconductor prices is likely to pare losses in the South Korean company's largest profit-driving sector.
Samsung said that in the October-December quarter, operating profits will likely reach 2.8 trillion South Korean won ($2.13 billion), down 35% from the same period last year when the company reported operating profits of 4.31 trillion won. Operating profit reached 2.43 trillion won in the previous quarter.
Earnings guidance was well below LSEG's SmartEstimate of 3.7 trillion won, which is weighted more towards analysts' forecasts who have been consistently more accurate.
The company said in its preliminary earnings that fourth-quarter revenue is likely to fall 4.9% from the same period last year to 67 trillion won. statement.
Samsung is the world's largest maker of dynamic random access memory chips 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 at manufacturing and finishing them. But its returns are much worse than competitors like TSMC, Corey Johnson, chief market strategist at The Futurum Group, said Tuesday.
“…bad returns can turn into really bad earnings results,” he told CNBC's “Squawk Box Asia” after previewing Samsung's earnings.
The company is scheduled to announce detailed earnings on January 31. According to the deposit.
Memory chip prices fell significantly last year, as a result of post-Covid excess inventories and weak demand for end products such as smartphones and laptops.
“We estimate that memory prices will start to recover from the fourth quarter of 2023, driven by production cuts by suppliers and a recovery in demand for mobile phones and PCs,” SK Kim, an analyst at Daiwa Capital Markets, said in a report issued on January 4.
This has hit Samsung's profits severely. Samsung's operating profit in the third quarter fell by 77.6% compared to a year ago, although it was better than expected. Operating profits in the second quarter were down 95% compared to the same period last year.
Demand for AI in all major applications will push the overall semiconductor sales market to recover in 2024.
Galen Zheng
IDC
In late October, Samsung and SK Hynix — the world's second-largest DRAM memory chip maker — indicated during third-quarter earnings calls that weak demand may have finally bottomed out following production cuts.
“We expect further price increases in the first half of 2024 and a notable rebound in memory makers’ profits in the second half of 2024 and 2025,” Daiwa Capital Markets’ Kim said, referring to the first and second half of this year.
“As such, we expect tailwinds for stock prices in the near term.”
Memory chip prices have been rising since the beginning of November, thanks to “memory manufacturers' strict control over supply and output,” according to Galen Zeng, senior research director for semiconductor research at IDC.
“The demand for artificial intelligence in all major applications will push the overall semiconductor sales market to recover in 2024,” Zeng said in a report. December 21 report.
“The semiconductor supply chain, including design, manufacturing, packaging and testing, will bid farewell to the economic downturn in 2023.”
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