Why We Can't Smile Even When Sales Exceed 300 Trillion Won
[Asia Economy Reporters Sunmi Park and Yeju Han] Samsung Electronics announced its fourth-quarter results for last year, showing an operating profit drop of 69%, a level described as a 'shock.' Although it recorded an all-time high annual revenue exceeding 300 trillion KRW last year, the sharp decline in operating profit in the fourth quarter prevented celebration. Samsung Electronics is preparing countermeasures to cope with difficult conditions, anticipating continued global IT demand weakness and a sluggish semiconductor market in the first quarter of this year.
On the 31st, Samsung Electronics stated that it set a new record for annual revenue last year. Revenue reached 302.23 trillion KRW, and operating profit was 43.38 trillion KRW. Revenue increased by 8.09% compared to 2021, while operating profit decreased by 15.99%.
The decrease in operating profit was most severe in the fourth quarter of last year. The fourth-quarter consolidated results showed revenue of 70.46 trillion KRW and operating profit of 4.31 trillion KRW, down 7.97% and 68.95%, respectively, compared to the fourth quarter of 2021.
The business division that most impacted the sharp decline in fourth-quarter results was the DS (Device Solutions) division, responsible for semiconductors. The DS division posted fourth-quarter revenue of 20.08 trillion KRW and operating profit of 270 billion KRW. Securities firms had predicted an average operating profit of 1.3368 trillion KRW for the DS division in the fourth quarter. This means operating profit fell by over 1 trillion KRW compared to expectations. In the previous quarter, the third quarter of last year, operating profit exceeded 5 trillion KRW but plummeted rapidly.
Memory performance sharply declined due to continued inventory adjustments by customers, causing significant price drops. System LSI suffered from poor sales of key products due to industry-wide inventory adjustments, impacting results. Only the foundry segment, which has a smaller share, achieved record quarterly and annual sales through expanded sales to major customers. Expanding production capacity focused on advanced processes and diversifying customers led to increased profits compared to the previous year.
The display business unit, SDC, recorded fourth-quarter revenue of 9.31 trillion KRW and operating profit of 1.82 trillion KRW. Although small and medium-sized displays saw a decline in performance compared to the previous quarter due to reduced smartphone demand, sales centered on flagship products resulted in generally decent results. Large displays performed better than expected, driven by increased year-end QD-OLED sales for TVs.
The possibility of improved Samsung Electronics performance in the first quarter is low. This is due to ongoing global IT demand weakness and a sluggish semiconductor market. Memory prices are expected to continue falling as customer inventory adjustments persist. The foundry segment, which was solid in the fourth quarter, is also expected to face deteriorating results due to reduced demand from the global economic slowdown and inventory adjustments by major fabless (semiconductor design) companies.
The mobile division, which experienced a significant decline in performance, has prepared countermeasures by expanding sales of flagship products such as the Galaxy S23 and continuing to strengthen sales of premium tablets and wearable devices.
However, Samsung Electronics expects IT and home appliance demand to recover around the second half of the year despite ongoing economic uncertainties. The DS division plans to further strengthen market and technology leadership through infrastructure investments for future readiness while expanding the share of advanced processes and products such as DDR5, LPDDR5x, and GAA. The DX division intends to enhance competitiveness by strengthening its premium lineup based on technological leadership. Additionally, it plans to further expand the SmartThings ecosystem by providing differentiated technologies and various partnerships that offer customized hyper-connected experiences to customers.
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