Samsung Electronics recorded an operating profit of 6.5 trillion won in the fourth quarter of last year, significantly below the estimates of 8.5 trillion won predicted by the securities industry. Until August of last year, an operating profit of around 12 trillion won was expected for the fourth quarter, but as the outlook gradually diminished, it was adjusted down to around 8 trillion won, yet the actual results were still far from that figure.
Some analysts in the domestic securities sector noted regarding Samsung Electronics’ fourth quarter results that "we are currently passing through the low point" and "the bottom has been hit." However, there are also analyses suggesting that the semiconductor market situation will remain challenging in the first and second quarters of this year, raising the possibility of continued underperformance throughout the first half of the year. In particular, with the supply of outdated DRAM in the Chinese market increasing by more than 50% compared to the previous year, the prospect of deeper losses in the general-purpose DRAM market is also high.
On the 8th, Samsung Electronics announced that it recorded a provisional revenue of 75 trillion won and an operating profit of 6.5 trillion won for the fourth quarter of last year. Compared to the same period last year, revenue increased by 10.65% and operating profit increased by 130.5%, but compared to the previous quarter, revenue decreased by 5.18% and operating profit decreased by 29.19%. It is estimated that there was an operating loss of about 2 trillion won in the foundry and system LSI sectors, and it appears that most of the business sectors, including memory, displays, smartphones, and home appliances, performed poorly.
Looking at the operating profit estimates of domestic securities firms by institutional sector, the DS sector, which is responsible for semiconductors, recorded 3.6 trillion won, showing a slight decrease from the previous quarter. While the memory division remains stuck at around 5 trillion won in operating profit, losses in the foundry and system LSI sectors ballooned to around 2 trillion won. Analysts suggest that after customers began adjusting inventory, general-purpose memory demand was weaker than expected, particularly outside of HBM and server-oriented DDR5.
Especially in the fourth quarter of last year, the price declines in DRAM, NAND flash, and enterprise solid-state drives (SSDs) heavily impacted Samsung Electronics. The price of DRAM fell by 2.38% and 17.07% in August and September, respectively, before plummeting 20.59% in November of the same year. The price of DRAM, which was $1.80 in January of last year, had dropped by 25% by December. The situation was similar for NAND flash. At the end of December last year, the price of general-purpose NAND flash products (128Gb 16Gx8 MLC) for memory cards and USBs was $2.08, down 3.48% from the previous month ($2.16). The price of NAND, which was $4.72 in January of last year, had halved by December.
Lee Soo-rim, a researcher at DS Investment & Securities, said, "Given that there were significant one-off expenses reflected in the third quarter, there were expectations for improvement in profits in the fourth quarter, but the polarization of demand continues, resulting in a difficult business environment." She estimated that in detail within the DS sector, the bit growth for DRAM fell by 7% compared to the previous quarter, and the average selling price (ASP) increased by only 1%. For NAND, it was estimated that bit growth fell by -4% and ASP decreased by about 7%.
Park Yoo-ak, a researcher at Kiwoom Securities, also noted, "Despite the positive impact of the rising won-dollar exchange rate on overall performance, we expect that the revenues in the non-memory and display sectors will fall short of expectations." He predicted that the non-memory sector would likely incur an operating loss of about 2 trillion won due to a decrease in the utilization rate and one-off expenses, while Samsung Display is expected to record an operating profit of 1 trillion won, a 33% drop from the previous quarter due to intensified market competition and increased fixed costs.
The MX sector, responsible for smartphones, and the DA sector, responsible for home appliances, are estimated to have recorded operating profits at the levels of around 2 trillion won and 500 billion to 600 billion won, respectively. Analysts suggest that the operating profit likely declined by around 20% year-on-year due to sluggish smartphone sales in the seasonal off-season and the fading effects of the launch of new foldable products. The home appliance sector is also suffering from a decline in profitability due to intensified competition with Chinese companies in major markets.
Particularly, adverse factors continue to impact the revenue of the MX sector. In the seasonal off-season, its market share is declining due to pressure from Apple in North America, one of its largest markets, while revenue is decreasing in emerging markets like India due to competition from Chinese smartphone companies. Last year, the global smartphone market grew by 6.2% year-on-year, but this growth was mainly driven by low-cost models in emerging countries and the Chinese market, benefiting Chinese companies.
A Samsung Electronics official stated, "On the surface, it appears that performance has significantly fallen below expectations, but there was a substantial investment related to research and development (R&D) in the semiconductor sector in the fourth quarter, which incurred many expenses to enhance technological competitiveness," adding, "Revenue also approached an all-time high of 300 trillion won on an annual basis, showing positive signs."
The outlook for performance in the first half of this year is mixed. There are opposing predictions: some analysts foresee fewer losses in the semiconductor sector starting in the first quarter, while others expect a downturn throughout the first half of the year. Researcher Park Yoo-ak forecasts, "As inventory levels normalize and the fifth generation HBM (HBM3E) business hits its stride, we anticipate a rebound in results starting in the second quarter, and the foundry is expected to begin reducing operating losses with increased utilization rates for Exynos and CIS."
Lee Soo-rim pointed out, "As the share of HBM increases, the average transaction price for DRAM is expected to stabilize, but a price decline for NAND is unavoidable." She noted that enterprise SSDs (eSSDs), which contributed significantly to Samsung Electronics' total operating profit last year, are still maintaining price stability for now, but declines are anticipated starting next year. She also observed that "Operating profits in the display sector will likely decrease, with revenues and operating profits both slipping due to intensified competition in OLED panel supply for Apple."