The 2023 financial year can be classified as an annus horribilis for Samsung Electronics. After losing 2.3% of smartphone market share, the Korean giant ceded the crown it had held as hegemon for 12 years to Apple. As if that weren't enough, Intel pushed the company into second place as the main supplier of semiconductors on a global scale and suffered year-on-year operating losses for the first time in three decades. Despite the setbacks that the company has suffered on various fronts, analysts prefer not to fall into a catastrophe as they believe that the setback is temporary in nature and is mainly due to the slowdown that is affecting the semiconductor memory sector, An industry worth 150 billion euros experienced “one of the worst declines in history” in the last 12 months, according to American consulting firm Gartner.
Samsung, which will report its results on January 31, expects operating profit in 2023 to rise 84.5% year-on-year to 6.5 trillion won from 43.38 trillion won (around 30.5 billion euros). (around 4.5 billion euros). If confirmed, it would be the first time since 2008 that the operating profit of South Korea's largest conglomerate did not exceed 10 trillion won. Samsung plays a crucial role in the South Korean economy. Founded in 1938 by Lee Byung-chul, the company has generated a significant share of the Asian country's GDP since the 1980s. This share, which has increased as Samsung consolidates its leading global business position, reached 18.3% in 2021, according to data from the Central Bank and the Antitrust Authority.
In addition to operating losses, the semiconductor and consumer electronics manufacturer also expects its annual sales to decline by 14.6%: in 2022, it recorded a historic record sales of 302.23 trillion won (more than 213 billion euros), which is expected to fall to 258.2 Trillion won in 2023.
“The global macroeconomic downturn and inflationary pressures have increased consumer caution, which has impacted sales of Samsung products and items from other manufacturers that use Samsung components,” said Ben Wood, principal analyst at CCS. Insight, the British technology market research company. Amid this situation, the global smartphone market recorded a 3.2% decline in sales in 2023, the year with the lowest annual volume in a decade, according to preliminary statistics from International Data Corporation (IDC). United States. The biggest surprise came from Apple, which managed to wrest the throne it had held since 2010 from Samsung with 20% market share.
Chip problems
This paradigm shift isn't just because iPhones are putting more pressure on Samsung's high-end models. It is also a direct result of the problems in the semiconductor industry. Manufacturers that had increased chip production to ensure supplies during the pandemic have faced excess inventory following the advent of remote work. This situation, together with weak demand for electronic devices, has led to a decline in the price of integrated circuits.
According to Gartner data, revenue in the semiconductor sector fell 11.1% year-on-year in 2023, driven by poor performance in the memory market. Samsung, which had topped the chip supplier rankings for two years, gave up its position to Intel after its profit fell 37.5% year-on-year.
The global sales slump in 2022 and early 2023 had a devastating impact on Samsung's Device Solutions division, the South Korean conglomerate's main business unit responsible for manufacturing semiconductors and also supplying other brands. Samsung is the world's largest manufacturer of memory chips, which are used in electronic devices to store temporary data and allow the processor to quickly access information. The Solutions division, from which the group's largest source of income comes, suffered an operating loss of 12.7 trillion won (more than 8.9 billion euros) in the first three quarters of 2023. In the October-December period, losses could reach 1.2 trillion won, the company emphasizes.
Faced with excess inventory, Samsung began reducing production of memory chips last April, bringing at least its DRAM (dynamic memory) business back to profitability (it has around 40% market share), although NAND flash memory continues to operate Minus (the share is 34%). Cuts by Samsung and other vendors have already had a positive impact on the market: DRAM chip prices rose between 18% and 23% globally in the fourth quarter, while NAND flash prices rose between 10% and 15%, according to TrendForce.
Experts say Samsung's results will improve this year, thanks to a recovery in chip prices and a boom in demand for high-bandwidth memory semiconductors – key to powering large generative artificial intelligence models like ChatGPT. Japanese financial services firm Daiwa Capital Markets expects “a significant recovery in memory manufacturers’ profits in the second half of 2024 and the first half of 2025,” while Japanese investment bank Nomura says “exports from South Korean memory chip companies will increase.” exceed 100% in the first half of 2024 compared to the previous year. For its part, Hong Kong bank HSBC predicts a “tremendous recovery in Samsung profits” over the course of 2024.
CCS Insight's Wood emphasizes that “despite the downturn, Samsung remains in an enviable position as one of the largest consumer electronics companies in the world.” By 2024, the expert highlights the company's strong commitment to artificial intelligence, which he believes will “help to stand out from the competition.” Samsung recently introduced the new high-end Galaxy S24 series, which comprehensively introduced generative artificial intelligence. “This development will reinvigorate consumer interest in their products,” says Wood, adding that “the rise of foldable phones.” [categoría en la que Samsung es un líder destacable] It will also give you a boost.”
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