Samsung Electronics is expected to post its smallest profit decline in six quarters, with analysts attributing the optimistic outlook to a rebound in semiconductor prices, notably in the company's vital chips division.

The world's leading producer of memory chips, smartphones, and televisions is projected to unveil a 14 per cent dip in fourth-quarter profit during its preliminary earnings announcement on Tuesday. Analysts estimate the operating profit to have reached 3.7 trillion won ($2.82 billion) in the October-December period, marking a comparative drop from the 4.31 trillion won recorded in the same quarter the previous year. The last instance of a year-on-year quarterly profit increase for Samsung dates back to the second quarter of 2022.

This potential positive financial performance aligns with Samsung's substantial surge in the stock market in the fourth quarter, positioning the company as Asia's second-most valuable listed entity after Taiwanese rival TSMC, boasting a market capitalization of approximately $390 billion.

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The chip division, traditionally a cornerstone of Samsung's revenue, is anticipated to have curtailed its losses to approximately 1.2 trillion won, based on an average of eight forecasts. Analysts highlight that the Dynamic Random Access Memory (DRAM) chips segment likely returned to profitability, signifying a promising turnaround.

Samsung grappled with chip division losses of 4.36 trillion won and 3.75 trillion won in the second and third quarters, respectively, amid a chip glut resulting from subdued demand for tech gadgets fueled by consumer inflation pressures. However, a resurgence in prices of DRAM and NAND flash chips in the December quarter indicates a broader industry recovery anticipated in 2024.

Key indicators include an estimated 18 per cent-23 per cent surge in mobile DRAM chip prices and a 10 per cent-15 per cent rise in mobile NAND flash chip prices during the fourth quarter, as reported by data provider TrendForce.

Despite Samsung's proactive production cuts in response to the industry downturn in the first half of 2023, sources suggest the company increased its silicon wafer supply in the fourth quarter, signalling a potential upturn in DRAM chip production.

Moreover, Samsung adopted an assertive approach in chip sales during the fourth quarter to mitigate inventory challenges, distinguishing its strategy from competitors like SK Hynix.

In the mobile business segment, Samsung is projected to record an operating profit of around 2.5 trillion won, as shipments of flagship foldable models witnessed a slight decline, estimated at approximately 1 million units each compared to Q3.

Rival Micron Technology's optimistic quarterly revenue forecast last month further underscores signs of a recovery in the memory chip market for the year 2024. Samsung's performance in the fourth quarter echoes a cautiously optimistic sentiment, bolstered by a chip sector resurgence and strategic business decisions.

(With Reuters inputs)