Samsung is the world’s biggest maker of memory chips.
Jakub Porzycki | Nurphoto | Getty Images
Samsung Electronics on Tuesday said it expects to post a 35% drop in operating profit within the fourth quarter of 2023, missing expectations by a large margin as a rebound in semiconductor prices likely narrowed losses within the South Korean company’s biggest profit-driving segment.
Samsung said that for the October-December quarter, operating profit is prone to be 2.8 trillion South Korean won ($2.13 billion), down 35% from the identical period a 12 months ago where the firm reported an operating profit of 4.31 trillion won. Operating profit was 2.43 trillion won within the previous quarter.
The profit guidance fell far in need of LSEG’s SmartEstimate of three.7 trillion won, which is weighted more heavily toward expectations of analysts who’ve been consistently more accurate.
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Fourth-quarter revenue likely fell 4.9% from the identical period a 12 months ago to 67 trillion won, the firm said in a preliminary earnings statement.
Samsung is the world’s largest maker for dynamic random-access memory chips that are present in consumer devices comparable to smartphones and computers.
“[Samsung is] excellent at making a few of the very best semiconductors on the earth, a minimum of in making them and getting them done. But their yields are a lot worse than competitors like TSMC,” said Cory Johnson, chief market strategist at The Futurum Group, on Tuesday.
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“… so bad yields can turn into really bad earnings results,” he told CNBC’s “Squawk Box Asia” after Samsung’s earnings preview.
The corporate is about to announce detailed earnings on Jan. 31, based on a filing.
Memory prices rebound
Memory chip prices fell drastically last 12 months, in consequence of excess inventories post-Covid and weak demand for end products like smartphones and laptops.
“We estimate memory prices began to rebound from 4Q23, driven by production cuts by suppliers and a recovery in demand for mobile and PC,” said SK Kim, analyst at Daiwa Capital Markets, in a Jan. 4 report.
This has hit Samsung’s earnings hard. Samsung’s third quarter operating profit plunged 77.6% from a 12 months ago, regardless that it got here in higher than expected. Operating profit within the second quarter slumped by 95% in comparison with the identical period a 12 months ago.
The demand for AI across all major applications will drive the general semiconductor sales market to get better in 2024.
In late October, Samsung and SK Hynix – the world’s second-largest DRAM memory chip maker – signaled during their third quarter earnings calls that weak demand could have finally bottomed out following production cuts.
“We expect further price hikes in 1H24 and a marked rebound in earnings for memory makers in 2H24 and 2025,” said Kim of Daiwa Capital Markets, referring to the primary and second half of this 12 months.
“As such, we anticipate tailwinds for share prices within the near term.”
Memory chip prices have began increasing for the reason that start of November, because of “memory manufacturers’ strict control of supply and output,” based on Galen Zeng, senior research manager of semiconductor research at IDC.
“The demand for AI across all major applications will drive the general semiconductor sales market to get better in 2024,” said Zeng in a Dec. 21 report.
“The semiconductor supply chain, including design, manufacturing, packaging, and testing, will bid farewell to the downturn in 2023.”