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Samsung set for smallest profit drop in 6 quarters on chip rebound

Samsung Electronics 005930.KS is expected to report its smallest profit drop in six quarters, analysts estimate, as a rebound in semiconductor prices shrinks losses in the South Korean company’s mainstay chips division.

The world’s biggest maker of memory chips, smartphones and televisions is expected to show a 14% fall in fourth-quarter profit when it announces preliminary earnings on Tuesday.

Operating profit likely fell to 3.7 trillion won ($2.82 billion) in the October-December quarter, according to the average of an LSEG SmartEstimate from 30 analysts, weighted toward those who are more consistently accurate.

That would compare with an operating profit of 4.31 trillion won in the December quarter of the previous year. Samsung last reported an on-year quarterly profit increase for the second quarter of 2022.

A solid set of results would justify Samsung’s sharp stock market run-up in the fourth quarter, which has made it Asia’s second-most valuable listed company after Taiwanese rival TSMC 2330.TW, with a market capitalisation of about $390 billion.

Samsung’s chip division – traditionally its biggest earner – likely reduced its quarterly loss to around 1.2 trillion won, according to an average of eight forecasts. Analysts said its Dynamic Random Access Memory (DRAM) chips business returned to a profit.

Samsung had reported chip division losses of 4.36 trillion won and 3.75 trillion won in the second and third quarters, respectively, as a chip glut from slow demand for gadgets driven by inflation pressures on consumers caused the worst industry downturn in decades.

However, prices of DRAM chips – used in tech devices – and NAND flash chips – used to store data – rebounded in the December quarter, including for older chips, in a sign of an industry-wide recovery expected this year.

Mobile DRAM chip prices rose an estimated 18%-23% during the fourth quarter, while mobile NAND flash chip prices rose 10%-15%, according to data provider TrendForce.

While Samsung has repeatedly cut production since the first half of 2023 to cope with the downturn, analysts and sources said Samsung took in more supply of silicon wafers, the building blocks for semiconductors, in the fourth quarter, signalling it is gearing up to increase DRAM chip production.

Samsung was also more aggressive in selling memory chips than competitors such as SK Hynix 000660.KS in the fourth quarter in a bid to lower inventory, analysts said.

Rival Micron Technology MU.O forecast a quarterly revenue above market estimates last month, in a sign of a recovery in the memory chip market in 2024.

Samsung’s mobile business likely saw an operating profit of around 2.5 trillion won, according to an average of forecasts from eight analysts, as shipments of its two flagship foldable models were estimated to have fallen about 1 million units each versus Q3. Reuters

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