This giant's semiconductor unit bonuses halted as profits plummet 84 per cent
On 31 January, Samsung Electronics released its Q2023 fourth-quarter results, with consolidated operating profit for the period at KRW 2.82 trillion, down 34.4% year-on-year, and sales at KRW 67.78 trillion, down 3.81% year-on-year.
Samsung Electronics 2023 fiscal year final verified operating profit of 6.567 trillion won (about 35.46 billion yuan), a year-on-year decrease of 84.86%. This is Samsung Electronics full-year operating profit since the global financial crisis in 2008 after 15 years fell below 10 trillion won. Samsung Electronics annual sales of 259 trillion won, down 14.33% from the previous year; net profit fell 72.17% to 15.48 trillion won.
Samsung Electronics said that operating profit continued to improve for the third consecutive quarter, but was well below the market's initial forecast of 3 trillion won range.
Much of this decline is due to the semiconductor business, which has been supporting its performance, suffering huge losses due to the industry downturn as well as the smartphone business experiencing market headwinds. Samsung Electronics said on an earnings call the same day:- "To improve profitability, it will focus on increasing sales of high value-added products." Samsung will seize the growing demand for advanced products and products with generative artificial intelligence, and strengthen the artificial intelligence capabilities of smartphones and other products.
In the semiconductor business, fourth-quarter sales were 21.69 trillion won, with an operating loss of 2.18 trillion won, beating market estimates of 1.7 trillion won. For the full year, Samsung's chip business turned from a 23.8 trillion won profit the previous year to a record loss of 14.9 trillion won in 2023, hit by an unprecedented downturn due to weak demand for chip devices.
However, Samsung Electronics said: there has been an overall recovery in memory demand due to an increase in memory capacity for personal computers and mobile products, as well as an increase in demand for generative AI servers, along with the normalisation of customer inventories. In particular, Samsung has significantly expanded sales of high-value-added products such as HBM memory, DDR5, LPDDR5X and UFS4.0. This has resulted in above-market growth in DRAMs in terms of single-digit production growth, improved inventory levels and a return to profitability for the first time in a year. Samsung said fourth-quarter revenue and operating profit improved from the third quarter as memory chip prices recovered and sales of high-end display products "continued to be strong".
Daiwa capital said in a report on 9 January, samsung's revenue and operating profit is expected to be "lower than our market expectations". After Samsung announced its results, Daiwa Capital said: "We believe that due to the increase in memory shipments and prices, the earnings of the memory business will improve significantly."
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