Samsung Sees 35% Q4 Profit Dip as Weak Chip Demand Continues

Samsung’s fourth-quarter profit is expected to drop 35%, missing analysts’ forecasts, due to continued weakness in consumer demand despite better memory chip prices.

The world’s top manufacturer of memory chips projected operating profit in the three months ending December 31 declined to ₩2.8 trillion ($2.13 billion) from ₩4.31 trillion last year. The figure fell short of analysts’ ₩3.7 trillion estimate.

Analysts suggested that Samsung’s failure to meet profit expectations may be attributed to the lower-than-anticipated profits in its chip contract manufacturing, mobile processors, TV, and home appliance segments.

Meanwhile, competitor LG Electronics reported an operating profit of ₩313 billion for the fourth quarter on Monday, ending significantly below forecast.

The Seoul-based company’s profit dip resulted from growing rivalry and increased marketing costs in TV and home appliance markets to recover consumer demand, which has been weighed by elevated inflation.

According to analyst Lee Min-hee, memory chip improvement was the only upturn as Chinese computer and mobile manufacturers replenished stocks in the fourth quarter after using up their own memory chip supplies for a long period.

Lee added that consumer demand remains weak, and its improvement is unlikely unless interest rates are reduced, and the economy receives a boost.

Analysts indicated a probable shipment decline of approximately 1 million units each for Samsung’s two flagship foldable smartphones in the fourth quarter, slightly impacting earnings.

Samsung’s Expected Memory Chip Price Recovery

Despite Samsung’s profit falling below expectations, the on-year decline is the least in five quarters after a 31% drop in the third quarter of 2022 as a memory chip surplus amid sluggish gadget demand led to a significant industry slump last year.

Analysts said the company’s chip division may have cut its fourth-quarter loss compared to the ₩4.36 trillion and ₩3.75 trillion in the previous two quarters.

Samsung has observed its memory chip earnings improve along with its dynamic random-access memory (DRAM) business returning to profitability.

For 2024, memory chips are expected to recover as prices bounced back in the December quarter following production cuts, with the trend seen persisting.

A Taipei-based data provider estimated an 18% to 23% increase in mobile DRAM chip prices in the fourth quarter, while it expects a 10% to 15% rise in mobile NAND flash chip prices.

Samsung’s shares rose 1.2% but later eased by 2.22% to ₩74,800.00 in the Asian afternoon session on Tuesday.

Detailed company earnings are scheduled to be released on January 31.