Samsung Electronics in a new tab, anticipated a steady recovery in memory chips and tech demand in 2024 after reporting a 34% decrease in fourth-quarter profitability
Samsung Electronics (005930.KS), in a new tab, forecasted a continuous recovery in memory chips and tech demand in 2024 after reporting a 34% reduction in fourth-quarter earnings despite a memory pricing rise as consumer demand remained poor in numerous industries.
The world’s largest memory chip manufacturer said it expected mobile and PC makers to put more, better processors in devices as the usage of artificial intelligence grows, while the need to replace aging servers will also contribute to a gradual demand recovery.
“In 2024, the memory business expects the market to continue to recover despite various potential obstacles, including interest rate policies and geopolitical issues,” the company said in a press release.
Samsung reported its operational profit decreased to 2.8 trillion won ($2.11 billion) in October–December, down from 4.3 trillion won the previous year.
For the full year, its semiconductor division lost a record 14.9 trillion won in 2023, down from a profit of 23.8 trillion won the previous year, due to an unusual downturn triggered by weak demand for chip-based electronics.
However, fourth-quarter losses fell to 2.18 trillion won, the lowest quarterly loss in 2023 in the business that has traditionally been Samsung’s cash cow, as Chinese PC and mobile makers began to refill chips and memory chip prices recovered.
Cross-town rival SK Hynix also stated last week that chip costs would rise this year as clients needed to resupply and manufacturers continued to reduce older chip manufacturing.
This year, Samsung plans to focus its memory business on cutting-edge semiconductors such as high-bandwidth memory (HBM) and server solutions needed for generative AI.
Looking to catch up with SK Hynix in memory chips needed for generative AI, Samsung kept its 2023 capital spending flat from the previous year, largely to grow production capacity of those chips, while SK Hynix and Micron (MU.O.) announced fresh to reduce investments.
SK Hynix was the first to produce the current version, known as HBM3, and has AI-chip leader Nvidia (NVDA.O) as a client, but experts say Samsung is aiming to increase yields for HBM3 and future HBM3E products.
“Given that it said it is set to produce those advanced chips in the first half of this year, the market will be watching for how much of a meaningful presence Samsung can secure this year,” said Ko Yeongmin, analyst at Daol Investment & Securities.
The mobile devices division earned 2.73 trillion won in operating profit in the fourth quarter, up from 1.7 trillion won the previous year, thanks to higher demand for more expensive smartphones, more tablet shipments with new product introductions, and demand for wearable devices during the peak Christmas season.
According to research by International Data Corp., Apple (AAPL.O) will end Samsung’s 12-year reign as the world’s top smartphone vendor in 2023, capturing a 20% market share as demand for luxury phones surpasses that of more affordable models.
However, in an effort to compete with Apple, Samsung intends to increase yearly flagship smartphone shipments by a double-digit percentage this year, aided by its latest premium devices with AI functions.
It also intends to maintain its lead in foldable phones as competitors like Alphabet (GOOGL.O) open new tabs. Google, Motorola, and China’s Honor and Oppo expand their foldable products.
Samsung’s chip contract manufacturing, TV, and home appliance divisions were vulnerable to sluggish consumer demand.
Samsung’s share price fell 1.4% in morning trading, compared to a 0.3% dip in the benchmark index (.KS11), after earnings from major clients Microsoft (MSFT.O), Alphabet, and AMD (AMD.O) fell short of forecasts, according to experts.
Its stock jumped 42% in 2023 on anticipation of increased memory chip demand, but has declined around 5% year to date.
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