Samsung Electronics flags 35% drop in Q4 profit, well below market consensus

SEOUL: Samsung Electronics Co Ltd reported a likely 35% drop in fourth-quarter operating profit on Tuesday, much worse than analysts expected as weakness persisted in its chips, TV and home appliance businesses even as chip prices improved.

The world’s largest memory chip, smartphone and TV maker estimated its operating profit fell to 2.8 trillion won ($2.13 billion) in October-December from 4.31 trillion won a year earlier, in a short preliminary earnings statement.

The profit missed a 3.7 trillion won LSEG SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate.

The company is due to release detailed earnings on Jan. 31.

Samsung to set up chip packaging research facility in Japan

Despite being weaker than expected, this is Samsung’s smallest on-year profit drop in five quarters, after reporting a 31% drop in Q3 2022, as a chip glut from slow demand for gadgets caused a severe industry downturn last year.

A recovery for memory chips is expected this year as prices rebounded in the December quarter after production cuts, with the trend expected to continue.

Samsung’s chip division likely reduced its fourth-quarter loss versus the 4.36 trillion won and 3.75 trillion won in the second and third quarters, analysts said, with its memory chip earnings improving with DRAM business returning to a profit.

Mobile DRAM chip prices rose an estimated 18%-23% during the fourth quarter, while mobile NAND flash chip prices rose 10%-15%, according to data provider TrendForce.

However, lower-than-expected profit from Samsung’s non-memory chips, television and home appliance businesses may have partly caused Samsung to miss market forecasts, analysts said.

Rival LG Electronics estimated on Monday fourth-quarter operating profit of 313 billion won, missing a 525 billion won LSEG SmartEstimate due to intensifying competition in the television and home appliance markets at a time when consumer demand is slow to recover from high inflation, analysts said.

Samsung’s mobile business likely saw shipments of its two flagship foldable models fall about 1 million units each versus the third quarter, leading to a slight dip in earnings, analysts said.

Revenue likely fell 4.9% from the same period a year earlier to 67 trillion won, Samsung said in the statement.