Samsung Electronics’ 2023 OP plummets to 15-year low on weak chip industry

[Photo by Yonhap]

Samsung Electronics Co. is estimated to have posted its worst operating profit in 15 years in 2023 due to the sluggish chip industry and increased competition in the home appliances market.

According to its earnings guidance released Tuesday, Samsung Electronics estimated its operating profit at 6.54 trillion won ($5 billion) in 2023, down 84.92 percent from the previous year.

Sales were also estimated at 258.16 trillion won in 2023, down 14.58 percent from a year ago.

It is the first time in 15 years for Samsung Electronics’ annual operating profit to fall below 10 trillion won. The last time was in 2008 when the South Korean tech giant posted 6.03 trillion won in operating profit.

The weak performance is attributed to the sluggish chip industry.

Samsung Electronics’ device solutions (DS) division, which is responsible for the chip business, has logged more than 12 trillion won in losses between January and September.

In the fourth quarter alone, Samsung Electronics is estimated to have posted an operating profit of 2.8 trillion won, down 35.03 percent from the same period a year ago, on sales of 67 trillion won, down 4.91 percent from a year ago.

The figures are lower than the brokerage consensus compiled by FnGuide Inc. – 3.74 trillion won in operating profit on sales of 70.36 trillion won.

Samsung Electronics’ preliminary fourth-quarter operating profit, however, is 15.23 percent higher than the third quarter ended September.

Shares of Samsung Electronics were trading 0.13 percent lower at 76,400 won on Tuesday morning.

The DS division is estimated to have narrowed losses to 1 trillion won~2 trillion won in the fourth quarter from 4.58 trillion won in the first quarter, 4.36 trillion won in the second quarter, and 3.75 trillion won in the third quarter.

Analysts noted that positive effects are being observed in the flagship semiconductor performance as memory reduction effects become evident and excess inventory is depleted.

The device experience (DX) unit is estimated to have posted an operating profit of more than 2 trillion won in the fourth quarter, Samsung Display (SDC) unit about 2 trillion won, and Harman 400 billion won.

SDC is expected to show robust performance thanks to continued strong demand from major smartphone customers and the response to new products this year.

The fourth-quarter figure for the DX division, however, is estimated to have experienced a decline compared to the previous quarter due to the delayed recovery in demand for TVs and home appliances, intensified competition, and a decrease in smartphone shipments often seen at year-end.

Samsung Electronics will release final figures with division details later this month.