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Samsung Poised for Smallest Profit Drop in 6 Quarters on Chip Rebound

Samsung Electronics, the global leader in memory chips, smartphones, and televisions, is expected to announce its smallest profit drop in six quarters.

Analysts estimate that a rebound in semiconductor prices has helped shrink losses in the company's chip division, which is its main source of revenue.

Preliminary earnings for the fourth quarter are set to be revealed on Tuesday, with analysts predicting a 14% decline in operating profit. The average estimate from 30 analysts, weighted towards those with a track record of accuracy, suggests that operating profit likely fell to 3.7 trillion won (US$2.82 billion) in the October-December quarter. This compares to an operating profit of 4.31 trillion won in the same quarter the previous year. The last time Samsung reported a year-on-year quarterly profit increase was in the second quarter of 2022.

If these estimates hold true, it would justify the significant increase in Samsung's stock market value during the fourth quarter. The company has become Asia's second-most valuable listed company, trailing only Taiwanese rival TSMC, with a market capitalisation of approximately US$390 billion.

The chip division, traditionally Samsung's top earner, is expected to have reduced its quarterly loss to around 1.2 trillion won. Analysts believe that the Dynamic Random Access Memory (DRAM) chips business has returned to profitability. This is a positive sign for the industry, as the chip market experienced a severe downturn due to slow demand for gadgets and inflation pressures on consumers.

However, there has been a rebound in prices for DRAM chips and NAND flash chips, which are used in tech devices and data storage, respectively. This recovery in prices, including for older chips, indicates an industry-wide turnaround expected in the coming year. Data provider TrendForce reports that mobile DRAM chip prices rose by an estimated 18 to 23% during the fourth quarter, while mobile NAND flash chip prices increased by 10 to 15%.

Despite cutting production in response to the downturn, Samsung has taken in more supply of silicon wafers, the building blocks for semiconductors, in the fourth quarter. This suggests that the company is preparing to ramp up DRAM chip production. Additionally, Samsung has been more aggressive in selling memory chips than its competitors, such as SK Hynix, in an effort to reduce inventory.

Rival company Micron Technology has also forecasted a quarterly revenue above market estimates, indicating a recovery in the memory chip market in 2024.

In terms of Samsung's mobile business, analysts predict an operating profit of around 2.5 trillion won. This estimate takes into account a decrease in shipments of the company's flagship foldable models by approximately 1 million units each compared to the previous quarter.

  • Samsung set to announce smallest profit drop in six quarters

  • Rebound in semiconductor prices helps shrink losses in chip division

  • DRAM and NAND flash chip prices show signs of industry-wide recovery

Source: SCMP

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