Samsung narrows profit drop in Q4 as chip demand begins rebound
Samsung's chip fab in Pyeongtaek, South Korea. Image: Samsung
Samsung said on Tuesday in its preliminary earnings guidance for the fourth quarter of 2023 that it expects operating profit of 2.8 trillion won and sales of 67 trillion won for the quarter. Operating profit dropped 35% from a year ago and revenue by approximately 5% over the same period.
Despite the poor performance, it is Samsung's best quarterly profit of a harsh year that was marred by the downturn in the chip market and sluggish demand for consumer electronics.
Taking the fourth quarter earnings into account, the company, the world's largest maker of memory chips and smartphones, recorded 6.5 trillion won in operating profit for the entire year of 2023 __ a dip of 85% from 2022 and its worst annual profit performance since 2005.
However, memory chip prices began to rebound during the October-December quarter, which is likely helping the South Korean tech giant's chip division narrow its operating loss.
The fourth quarter is also traditionally an off-season for consumer electronics as gadget makers like Samsung offload their inventory on holiday sales. Conversely, it is a strong quarter for its component businesses such as display and chips as customers prepare to roll out new devices for the next year.
Analysts say Samsung's reduction of its memory chip output is showing effect and the company successfully reducing its inventory. They expect demand for memory chips to slowly recover throughout 2024.
Demand for high-end DRAM is especially expected to be high throughout the year as customers continue in their server and data center spending from the huge popularity of AI.
Samsung will publish its full earnings report for the fourth quarter at the end of the month.