Samsung profit plummets despite signs of recovery

Samsung has forecast a sharp drop in fourth-quarter profit, missing estimates and posting its lowest full-year profit in 15 years.

The South Korean chip, handset and TV giant said Tuesday it expected an operating profit for the quarter of 2.8 trillion Korean won (US$2.1 billion), a 35% slide from last year.

It will be its fifth consecutive decline in profit as it has battled the post-COVID semiconductor glut and the fall-off in demand for electronics.

The forecast was 28% below the average estimate of KRW3.9 trillion from analysts surveyed by Yonhap Infomax.

The company expects fourth-quarter sales to decline 4.9% to KRW67 trillion ($50.8 billion). Full-year operating income is forecast to be KRW6.5 trillion ($4.9 billion), down 85% – its lowest since the global financial crisis.

The Samsung guidance did not include numbers for its business segments. But analysts had expected the semiconductor business to post an operating loss of around KRW2 trillion ($1.5 billion), with a full-year operating loss of some KRW14 trillion ($10.6 billion), Yonhap said.

Aided by cuts in memory chip production by Samsung and rivals including SK Hynix and Micron, the result also represents progress compared to the first three quarters when the semiconductor business accumulated operating losses of KRW12 trillion ($9.1 billion).

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Chip sales to grow again 

Analysts believe the smartphone and display division will likely post strong numbers to partially offset the losses in the chip business. The device unit is tipped to record operating profit of around KRW2 trillion ($1.5 billion).

Most in the semiconductor industry are expecting a rebound this year.

In a revised forecast in November, IDC said the market bottomed out in 2023 and would grow 20% in 2024. 

Gartner says global semiconductor revenue declined 11% in 2023, with memory sales down 39%, but predicts industry growth of 17% this year.

Roko Kim, an analyst at Hana Financial Investment, told the Financial Times the glut was easing faster than expected thanks to the supply cuts. Kim predicted DRAM inventories would likely fall short of market demand by the end of the first quarter.

Samsung stock, which has risen 24% in the past year on expectations of a chip market recovery, fell 2.35% on the Seoul stock exchange Tuesday. 

The company will issue its full fourth-quarter results on January 31.