Samsung is the world’s greatest maker of reminiscence chips.
Jakub Porzycki | Nurphoto | Getty Photos
Samsung Electronics on Tuesday mentioned it expects to publish a 35% drop in working revenue within the fourth quarter of 2023, lacking expectations by a large margin as a rebound in semiconductor costs doubtless narrowed losses within the South Korean firm’s greatest profit-driving section.
Samsung mentioned that for the October-December quarter, working revenue is more likely to be 2.8 trillion South Korean received ($2.13 billion), down 35% from the identical interval a yr in the past the place the agency reported an working revenue of 4.31 trillion received. Working revenue was 2.43 trillion received within the earlier quarter.
The revenue steerage fell far wanting LSEG’s SmartEstimate of three.7 trillion received, which is weighted extra closely towards expectations of analysts who’ve been persistently extra correct.
Fourth-quarter income doubtless fell 4.9% from the identical interval a yr in the past to 67 trillion received, the agency mentioned in a preliminary earnings assertion.
Samsung is the world’s largest maker for dynamic random-access reminiscence chips that are present in shopper gadgets comparable to smartphones and computer systems.
“[Samsung is] excellent at making a number of the finest semiconductors on this planet, at the very least in making them and getting them performed. However their yields are a lot worse than rivals like TSMC,” mentioned Cory Johnson, chief market strategist at The Futurum Group, on Tuesday.
“… so dangerous yields can flip into actually dangerous earnings outcomes,” he informed CNBC’s “Squawk Field Asia” after Samsung’s earnings preview.
The corporate is ready to announce detailed earnings on Jan. 31, in line with a submitting.
Reminiscence costs rebound
Reminiscence chip costs fell drastically final yr, because of extra inventories post-Covid and weak demand for finish merchandise like smartphones and laptops.
“We estimate reminiscence costs began to rebound from 4Q23, pushed by manufacturing cuts by suppliers and a restoration in demand for cellular and PC,” mentioned SK Kim, analyst at Daiwa Capital Markets, in a Jan. 4 report.
This has hit Samsung’s earnings exhausting. Samsung’s third quarter working revenue plunged 77.6% from a yr in the past, regardless that it got here in higher than anticipated. Working revenue within the second quarter slumped by 95% in comparison with the identical interval a yr in the past.
The demand for AI throughout all main functions will drive the general semiconductor gross sales market to recuperate in 2024.
In late October, Samsung and SK Hynix – the world’s second-largest DRAM reminiscence chip maker – signaled throughout their third quarter earnings calls that weak demand could have lastly bottomed out following manufacturing cuts.
“We anticipate additional value hikes in 1H24 and a marked rebound in earnings for reminiscence makers in 2H24 and 2025,” mentioned Kim of Daiwa Capital Markets, referring to the primary and second half of this yr.
“As such, we anticipate tailwinds for share costs within the close to time period.”
Reminiscence chip costs have began growing because the begin of November, because of “reminiscence producers’ strict management of provide and output,” in line with Galen Zeng, senior analysis supervisor of semiconductor analysis at IDC.
“The demand for AI throughout all main functions will drive the general semiconductor gross sales market to recuperate in 2024,” mentioned Zeng in a Dec. 21 report.
“The semiconductor provide chain, together with design, manufacturing, packaging, and testing, will bid farewell to the downturn in 2023.”
