In a surprising turn of events, Samsung Electronics Co Ltd disclosed a significant 35% decrease in its fourth-quarter operating profit, falling well below market expectations. The world’s leading manufacturer of memory chips, smartphones, and TVs estimated its operating profit to be 2.8 trillion won ($2.13 billion) for October-December, compared to 4.31 trillion won in the same period the previous year.
This preliminary earnings statement indicates a substantial miss, falling short of the 3.7 trillion won LSEG SmartEstimate, which is heavily influenced by forecasts from consistently accurate analysts. Detailed earnings are anticipated to be released on January 31.
Despite this downturn, it’s noteworthy that this marks Samsung’s smallest year-on-year profit decline in five quarters. The company faced a 31% drop in Q3 2022 due to a chip glut and slow demand for gadgets, causing a severe industry downturn in the preceding year.
Analysts project a potential recovery for memory chips in the upcoming year as prices rebounded in the December quarter following production cuts. Samsung’s chip division is expected to reduce its fourth-quarter loss, with improvements in memory chip earnings, particularly in the DRAM business returning to profitability.
While mobile DRAM and NAND flash chip prices witnessed increases during the fourth quarter, Samsung’s non-memory chips, television, and home appliance businesses may have contributed to the deviation from market forecasts.
Rival LG Electronics also faced challenges, estimating a fourth-quarter operating profit below market expectations due to intensifying competition in the television and home appliance markets amid slow consumer demand recovery from high inflation.
Samsung’s mobile business experienced a slight dip in earnings, with a reported decrease in shipments of its flagship foldable models in the fourth quarter. Overall revenue is expected to have fallen by 4.9% from the same period the previous year, totaling 67 trillion won.
