Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Samsung Electronics' 2023 operating profit falls to 15-year low of $4.98 bil.
Samsung Electronics' outdoor advertisement is displayed at the Las Vegas Convention Center, Nev., where the CES 2024 is taking place, Sunday (local time). Courtesy of Samsung Electronics
By Baek Byung-yeul
Sluggish global chip market blamed for weak earnings
Samsung Electronics posted an operating profit of 6.54 trillion won ($4.98 billion) in 2023, which was the lowest in 15 years, due to a slump in the global semiconductor market, the company said, Tuesday.
The tech giant said tentative operating profit last year decreased 84.92 percent compared to 2022, while sales declined 14.58 percent to 258.16 trillion won.
This is the first time since 2008 that Samsung’s annual operating profit fell below 10 trillion won. That year, at the height of the global financial crisis, Samsung saw its operating profit sink to 6.03 trillion won. Samsung, which sells semiconductors, smart devices, TVs and home appliances, did not disclose the detailed earnings results of each business division.
The poor performance comes as the memory chip giant struggles to retain sales momentum amid a global semiconductor market slump.
Until the third quarter of 2023, its Device Solutions (DS) division, which is in charge of the semiconductor business, suffered an operating loss of around 12 trillion won. Industry watchers estimate the operating loss expanded to around 14 trillion won by the fourth quarter.
However, experts said efforts to reduce production to mitigate the shock of decreased memory semiconductor demand appears to be paying off gradually and that profitability has been improving slightly since the second half of last year as excess inventory is depleted.
"We estimate that the deficit in the memory semiconductor sector decreased in the fourth quarter compared to the previous quarter," said Kim Rok-ho, an analyst at Hana Securities. "In particular, the price of NAND memory chips rose by more than 20 percent from the previous quarter, contributing significantly to the deficit reduction."
Another analyst said there is room for a slight improvement in profitability in the fourth quarter due to a decrease in semiconductor production.
"Considering the burden of fixed costs due to an increase in cost per unit stemming from recent reductions, the profit improvement will be smaller than the expansion of sales in the fourth quarter of last year," said Ko Young-min, an analyst at Daol Investment & Securities.
The DX division, which handles TVs, home appliances and smartphones, is expected to have suffered a deterioration in profitability compared to the previous quarter as global market demand recovers slowly, while competition intensifies.
"The volume and price would have decreased due to the diminished flagship effect," the Hana Securities analyst added.
Samsung Electronics plans to focus on AI-related products in 2024 to improve profitability. The company has revealed plans to enhance smartphones and home appliances with AI features, release memory chips catering to the AI market, and increase its market share in high-value-added industries.
The company will announce its final results for the fourth quarter and all of 2023, including the results of each business division, on Jan. 31.