Samsung Electronics, which operates on the three pillars of its smartphone, memory, and semiconductor foundry businesses, has been hit by a global electronics inventory surplus in the past year, and its performance has fallen into a downturn. With inventory digestion, production cuts and demand recovery starting in October last year, the market expects that the fourth quarter operation should be able to get out of the haze. However, the recovery appears to be slower than expected, with Samsung Electronics expecting a 35% lower-than-expected decline in operating profit in the fourth quarter, undermining hopes for a profit recovery driven by the semiconductor business.
Last year, due to excess inventory after the new crown epidemic, as well as weak demand for end products such as smartphones and notebooks, memory chips **sharply**, dealt a heavy blow to Samsung's profits. Samsung's operating profit in the third quarter was 77% higher than the same period last year6%, and operating profit in the second quarter was down 95% from the same period last year.
Although the fourth quarter of 2023 has begun**, driven by the reduction of business production and the demand for end products, the profit is still not as expected. Samsung Electronics reported a 35% decline in operating profit to 28 trillion won, has been in decline for six consecutive quarters, and revenue reached 67 trillion won, down 4 percent year-on-year9%, both lower than market expectations, also reflects the current technology industry is facing more severe challenges such as reduced consumer spending and potential surplus in the semiconductor market. 
Samsung Electronics' stock price performance over the past year. (source：google finance)
Hope is in 2024Samsung and SK hynix, the world's second-largest memory chip maker, said at the Q3 earnings conference** that after the production cuts, weak demand may finally bottom out, and it is expected that the first half of 2024 will **further**, and the profit of memory manufacturers in the second half of the year and 2025 will be significant**.
Market research institutions also expect that the demand for AI will drive the recovery of the entire semiconductor sales market in 2024. The semiconductor ** chain, including design, manufacturing, packaging, and testing, will bid farewell to the downturn in 2023. According to preliminary financial reports, Samsung Electronics' chip division is showing signs of reducing its quarterly loss to 1About 2 trillion won.
Samsung now aims to catch up with rival SK Hynix in the emerging high-performance memory chip HBM segment, with plans to increase capacity by 2 by 20245 times. HBM is an advanced chip that can process data faster and can be paired with hardware, such as NVIDIA's accelerators, to accelerate data processing for intensive tasks such as training AI models.
Samsung has touched the nerves of South Korea's economySamsung accounts for 40% of South Korea's GDP, and Samsung's crisis is also South Korea's crisis. Samsung Electronics' operating profit is expected to fall by 85% and revenue is expected to decline by 15% in 2023, as South Korea's dependent** economy underperforms in 2023 due to pent-up demand for semiconductors.
With the start of memory chips, emerging technologies such as AI are increasing demand. The Bank of Korea expects South Korea's exports to be stronger after resuming growth in October this year, with chip production up 40% year-on-year and shipments up 80% in November, and semiconductor manufacturers driving South Korea's industrial output up 53%, better than expected, and the economy will grow by 22%。The International Monetary Fund (IMF) expects South Korea's GDP growth to increase from 1 in 20234% to 2 in 20242%。South Korea's economy is expected to remain at 21-2.3% growth trajectory.
Header image**: Unsplash).