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Updated January 9th, 2024 at 08:05 IST

Samsung warns of larger-than-anticipated Q4 profit decline on weak demand

Samsung estimated its operating profit to have fallen to 2.8 trillion won ($2.13 billion) in the October-December period, down from 4.31 trillion won a year ear

Business Desk
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Smasung’s Q4 profit to decline: Samsung Electronics Co Ltd announced a larger-than-anticipated 35 per cent decline in fourth-quarter operating profit on Tuesday, disappointing analysts as weak consumer demand persisted across several business segments, despite an improvement in memory chip prices.

As the world's leading memory chip, smartphone, and TV manufacturer, Samsung estimated its operating profit to have fallen to 2.8 trillion won ($2.13 billion) in the October-December period, down from 4.31 trillion won a year earlier. 

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Image Credits: Pexels 

The reported profit fell short of the 3.7 trillion won LSEG SmartEstimate, which is inclined towards forecasts from consistently accurate analysts.

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Analysts suggested that lower-than-expected profits from Samsung's chip contract manufacturing, mobile processors, television, and home appliance businesses could be responsible for the company missing forecasts. 

Meanwhile, Samsung's rival, LG Electronics, also reported a below-estimated fourth-quarter operating profit of 313 billion won, citing intensified competition and increased marketing spending in the television and home appliance markets.

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Despite the weaker performance, this represents Samsung's smallest year-on-year profit decline in five quarters, following a 31 per cent drop in the third quarter of 2022. 

The memory chip division is expected to have reduced its fourth-quarter loss compared to the previous two quarters, with the memory chip earnings improving, particularly in the DRAM business.

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The recovery for memory chips is anticipated to continue this year as prices rebounded in the December quarter after production cuts. Mobile DRAM chip prices reportedly rose 18-23 per cent, while mobile NAND flash chip prices increased by 10-15 per cent during the fourth quarter.

Image Credits: Pixabay

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 Samsung's mobile business is likely to have experienced a slight decline in earnings, with shipments of its flagship foldable models falling by approximately 1 million units each compared to the third quarter. 

Despite these challenges, Samsung's chip division's outlook is positive, and investors are keen to hear the company's plans to boost demand, such as incorporating on-device artificial intelligence, when detailed earnings are released on January 31. 

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Shares in Samsung Electronics opened 1.2 per cent higher but settled for a 0.1 per cent gain on Tuesday morning.

(With Reuters Inputs)

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Published January 9th, 2024 at 07:56 IST

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