Samsung Electronics headquarters in Seocho-gu, Seoul. /News1

Samsung Electronics recorded an operating profit of 2.9 trillion won in its core semiconductor (DS) institutional sector in the fourth quarter of last year (October to December), lower than several previously downgraded forecasts. After the earnings guidance was announced on the 8th, the securities industry expected Samsung Electronics' operating profit in the semiconductor institutional sector to be in the 3 trillion won range, but the reality was even worse.

It fell short of the operating profit of its competitor SK hynix, which was 8.08 trillion won. This is due to a combination of adverse factors, including delays in the supply of high-bandwidth memory (HBM) fifth generation, weak demand for IT devices such as PCs and mobiles, and price declines in memory due to Chinese low-cost competition. For the annual results, Samsung Electronics' DS institutional sector also lagged behind SK hynix for the first time in history. The operating profit of the DS institutional sector last year was 15.1 trillion won, only 64% of SK hynix's operating profit of 23.4673 trillion won.

◇ Samsung Electronics fails to meet lowered expectations... Large deficit estimated in non-memory sector

Samsung Electronics announced on the 31st that its consolidated revenue and operating profit for the fourth quarter of last year were 75.8 trillion won and 6.5 trillion won, respectively. This represents a decrease of 4.19% and 29.30% compared to the previous quarter. Most securities firms initially expected an operating profit of around 10 trillion won but later revised their forecasts down to about 7 trillion won, yet it still fell short of these already lowered expectations.

Graphic by Jeong Seo-hee

Samsung Electronics explained that its memory division, the company's cornerstone, saw its operating profit fall short of market expectations due to increased initial ramp-up expenses for research and development and expanded advanced process production capacity. Despite increased sales of HBM and high-capacity DDR5 for servers as demand for mobile and PC remains weak, the average selling price (ASP) of DRAM rose, leading to record revenue for the fourth quarter but reduced profitability.

The bleeding was particularly severe in the non-memory sector. The securities industry estimates that an operating loss of over 2 trillion won occurred. Samsung Electronics noted, "The system LSI saw a decline in operating profit due to weak mobile demand and increased research and development expenses for advanced product development," adding, "In foundry, the operating profit decreased due to continued weak mobile demand and lower utilization rates, along with increased research and development expenses for advanced processes."

◇ Mobile and home appliance sectors also fell short of expectations amid intensified competition... Facility investment reaches an all-time high

The mobile business recorded an operating profit of 2.3 trillion won, which is below expectations. The decline in smartphone sales due to reduced flagship model launch effects resulted in lower sales and operating profit compared to the previous quarter. However, on an annual basis, sales from the Galaxy S24 series grew by double digits, showing solid growth in flagship product sales, and both sales volume and revenue for tablets and wearables increased.

The display institutional sector also recorded an operating profit of only 900 billion won in the fourth quarter, failing to reach half of the 2 trillion won from the same period last year. It is interpreted that profitability worsened as demand for panels used in Apple iPhones, one of its key customers, slowed down, alongside OLED panel sales for Apple iPads, which fell to half of the initial expectations.

In the home appliance business, an operating profit of 200 billion won was recorded, marking a turnaround from loss compared to the previous year; however, it significantly fell short of the initial projection of 500 billion won due to intensified competition in major markets. In particular, competitiveness against Chinese companies in emerging markets such as China and India led to increased expenses, resulting in disappointing performance.

Meanwhile, Samsung Electronics' facility investment for the fourth quarter of last year was estimated at 17.8 trillion won. On an annual basis, it reached a record high of 53.6 trillion won. Analysts suggest that despite the ongoing recession and poor performance, the company is not skimping on research and development expenses. Samsung Electronics stated, "The investment in memory has increased compared to the last quarter and annually due to expenditures for securing future technology leadership and investments for expanding production capacity for advanced processes such as HBM," adding, "Although the detailed investment plan for this year has not yet been finalized, it is expected that memory investments will be similar to last year's levels."