Samsung Electronics faced its sixth consecutive quarter of declining operating profit, revealing weakened consumer demand and casting uncertainty on the broader tech recovery timeline. The South Korean giant reported a 35% dip in operating income to 2.8 trillion won ($2.1 billion), falling 24% short of estimates, with revenue sliding to 67 trillion won. The persistently sluggish demand for smartphones and memory chips because of economic uncertainties clouds hope for a 2024 market resurgence.
Economic uncertainty and sluggish demand for smartphones and memory chips have resulted in a slower market recovery than anticipated. In contrast to expectations, Micron Technology, Inc. “This shows that the rebound is slower than we all thought,” said Tom Kang, research director at Counterpoint Technology Market Research. Challenges face Samsung’s October prediction of a gradual rebound in the $160 billion memory market in 2024, driven by AI development, with prices expected to recover later in 2023. The company’s shares dropped 2.4% in Seoul on Tuesday, with disappointing results attributed, in part, to a low utilization rate in its foundry chipmaking business, as highlighted by Sanjeev Rana, an analyst at CLSA Securities Korea Ltd.
However, it faced challenges, with low utilization in its foundry chipmaking business contributing to disappointing results. The company aims to enhance its high-density memory chip presence, targeting a 2.5-fold capacity increase in 2024 and focusing on advanced chips like HBM to handle data swiftly. Samsung’s renewed focus on AI chips becomes crucial for solid profit growth in 2024 as it strives to catch up with competitors and leverage the booming demand for artificial intelligence applications.
“It is likely that Samsung’s chip business will return to profitability within the first half of 2024,” Rana added.
The company is striving to narrow the gap with rival SK Hynix Inc. in the expanding high-density memory chip sector, aiming to increase capacity by 2.5 times in 2024. Utilizing High Bandwidth Memory (HBM), an advanced chip known for its accelerated data processing capabilities, in collaboration with hardware like Nvidia Corp.’s accelerators, enhances overall performance, particularly in resource-intensive tasks such as AI model training. Hynix CEO Kwak Noh-Jung envisions that the surging demand for AI could potentially double the market value of the Korean firm within the next three years.
“Samsung may have to gain market share in AI chips to achieve solid profit growth in 2024,” Bloomberg Intelligence analysts Masahiro Wakasugi and Phu Pham wrote in a note after the results.
