Samsung Expects Q4 2023 Profit To Plunge by 35%

Samsung Electronics, the South Korean tech giant, said that it expects a significant 35% drop in its operating profit for the last quarter of 2023. This predicted dip has widely missed market expectations, largely due to a resurgence in semiconductor prices, which have heavily impacted the firm’s main profit-generating sector.

Samsung stated that in the October to December quarter, the company’s profit likely reached a low of 2.8 trillion South Korean won ($2.13 billion). This figure marks a significant decrease compared to the same period in the previous year when the company posted a healthy profit of 4.31 trillion won. This dip also marks a decline from the company’s preceding quarter, during which it earned a profit of 2.43 trillion won.

This disappointing profit guidance didn’t live up to the LSEG SmartEstimate’s anticipated 3.7 trillion won figure. This estimate normally leans toward the predictions of consistently accurate analysts. The company’s estimated revenue in the fourth quarter is also lower, with a potential drop of 4.9% from the previous year, hitting 67 trillion won, according to preliminary earnings statements.

The company’s struggles can be attributed to its semiconductor yield rates, which haven’t been able to match those of competitors like TSMC. Poor yields often have a direct impact on earnings, and in Samsung’s case, this seems to have held true.

Samsung is expected to announce the specifics of its earnings later this month. This announcement follows a major slump in the memory chip market, which was a result of excess inventories post-Covid and a decline in demand for products like smartphones and laptops where these chips are typically used.

On the upside, memory chip prices have started to rebound since early November 2023. This recovery has been driven by production cuts and increased demand for mobile and PC. However, it still hasn’t been enough to prevent a 77.6% year-over-year drop in Samsung’s operating profit in the third quarter, and a staggering 95% year-over-year slump in the second quarter, even though these were somewhat better than expected.

Fortunately, the future isn’t all doom and gloom for the tech giant. Both Samsung and its closest competitor, SK Hynix, signaled that the weak demand may have bottomed out during their third-quarter earnings calls.