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 expects chip business to shift to profit in Q1 on rising AI demand
Visitors to Samsung Electronics’ store in Sao Paulo, Brazil, try out Galaxy S24 smartphones, Jan. 17. Courtesy of Samsung Electronics
By Baek Byung-yeul
Samsung Electronics expects to see its semiconductor business swing back to profit from the first quarter of this year buoyed by robust demand for AI memory chips, the chipmaker said Wednesday.
The company said that it continued to post losses for the fourth consecutive quarter in the chip sector in the final quarter of 2023, but its DRAM memory chip business turned a profit from October to December.
The firm is witnessing increasing demand for high bandwidth memory (HBM) chips, products for the AI market, and DDR5 memory chips, which have faster data transfer speeds than DDR4.
"We intend to focus on improving profitability by actively responding to the demand for HBM and solid-state drive (SSD) related to generative AI. Accordingly, we expect our memory business to shift to a surplus in the first quarter," Kim Jae-joon, executive vice president of the device solutions (DS) division at Samsung, told investors during a fourth quarter earnings conference call.
"HBM sales volumes are breaking records every quarter, and grew by more than 40 percent in the fourth quarter of last year compared to the previous quarter and by 3.5 times compared to the same period of the previous year," Kim said.
In its fourth quarter earnings announcement, Samsung said it achieved an operating profit of 2.82 trillion won ($2.11 billion), down 34.4 percent from the same period of 2022. Sales stood at 67.78 trillion won, down 3.8 percent year-on-year.
On an annual basis, Samsung posted sales of 258.94 trillion won, down 14.3 percent year-on-year, and an operating profit of 6.57 trillion won, down 84.9 percent year-on-year.
The DS division, which oversees the semiconductor business, posted an operating loss of 2.18 trillion won in the fourth quarter, but the company announced that the DRAM business had turned a profit.
"The memory market showed signs of recovery in the fourth quarter compared to the previous quarter. With the recovery of customer demand, we achieved bit growth exceeding the market, and both DRAM and NAND flash inventories were depleted due to the reduction policy," the executive vice president said.
Bit growth refers to the amount of chips produced and the figure is used as a barometer to measure the status of the semiconductor market. In a nutshell, higher bit growth means more demand.
Regarding this year's outlook for the memory semiconductor business, the executive said that Samsung will continue its strategy of reducing semiconductor production, which it started last year.
"The goal of normalizing memory inventory and the principle of production volume remain unchanged. So far, the inventory is rapidly decreasing due to the impact of a downward adjustment in production," Kim said.
The MX business, in charge of Samsung's smartphone business, achieved an operating profit of 2.73 trillion won in the fourth quarter, down from 3.3 trillion won in the third quarter. Samsung said that sales and profits decreased compared to the previous quarter as smartphone sales declined as the effects of new model releases weakened in the fourth quarter.
"While inflation and political instability continue around the world, the smartphone market grew slightly centered around premium products," Samsung said.
However, Samsung increased shipments of tablet PCs focusing on premium new products, while wearable products also maintained solid sales during the end-of-the-year peak season.
The company said that it plans to acquire a large percentage of the AI smartphone market by expanding sales centered on the newly launched Galaxy S24 series, actively promoting new AI experiences and strengthening collaboration with dealers.
The VD unit, in charge of the TV business, suffered an operating loss of 50 billion won in the fourth quarter, shifting to the red. This was due to stagnant demand in the TV market and intensified competition, the company added.