A huge storm hit Samsung. Business

The 2023 financial year can be classified as annus horribilis For Samsung Electronics. After losing 2.3% of the smartphone market share, the Korean giant handed over to Apple the crown it had held for 12 years. As if that wasn’t enough, Intel pushed it to second place as the main supplier of semiconductors globally and, for the first time in three decades, suffered year-on-year operating losses. Despite the setback that the company has faced on various fronts, analysts prefer not to get into trouble, as they believe that the setback is temporary and is mainly due to the recession that affected the semiconductor memory sector, it The industry is worth 150 billion euros. This marked “one of the worst declines in history” over the past 12 months, according to US consulting firm Gartner.

Samsung, which will report its results on Jan. 31, has forecast that 2023 operating profit will likely decline 84.5% year-on-year, from 43.38 trillion won (about 30.5 billion euros) to 6.5 trillion won (about 4.5 billion euros. ) Will be done. If confirmed, it would be the first time since 2008 that South Korea’s largest conglomerate’s operating profit will not exceed 10 trillion won. Samsung plays an important role in the South Korean economy. The company, founded by Lee Byung-chul in 1938, has represented a significant percentage of the Asian country’s GDP since the 1980s. This ratio, which has been rising as Samsung consolidates its leading business position globally, reached 18.3% in 2021, according to data from the central bank and antitrust agency.

In addition to operating losses, the semiconductor and consumer electronics maker is also projected to see its annual turnover decline by 14.6%: In 2022 it recorded a historic record of 302.23 trillion won (over 213 billion euros) in revenue, which will likely decline to 258.2 Will go. Trillion won in 2023.

Ben Wood, chief analyst at CCS Insight, a British technology market research company, summarized, “The global macroeconomic recession and inflationary pressures have increased consumer caution, affecting sales of Samsung products and other manufacturers’ goods that use its components. happened.” Amid this situation, according to preliminary data from the International Data Corporation (IDC), the global smartphone market saw a 3.2% decline in sales in 2023, the year with the lowest annual volume in a decade. United States of america. The main surprise came from Apple, which with 20% market share managed to snatch away from Samsung the throne it had been occupying since 2010.

chip problem

This paradigm shift is not only a result of iPhones putting more pressure on Samsung’s high-end models; It is also a direct result of the problems in the semiconductor industry. Manufacturers, which increased chip production to ensure supply during the pandemic, have found themselves with excess inventory after the rise of teleworking. This situation, coupled with weak demand for electronic components, has led to a decline in integrated circuit prices.

According to Gartner data, in 2023, semiconductor sector revenue will decline by 11.1% year-on-year, driven by the poor performance of the memory market. Samsung, which had led the ranking of chip suppliers for two years, gave up its position to Intel after a 37.5% year-on-year decline in its profits in this division.

The global decline in sales in 2022 and early 2023 had a devastating impact on Samsung’s Device Solutions division, the South Korean group’s main business arm, which is also responsible for manufacturing semiconductors and supplying other brands. Samsung is the world’s largest manufacturer of memory chips that are used in electronic devices to store temporary data and allow quick access to information by processors. The solutions unit, 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. The loss in the October-December period could reach 1.2 trillion won, the company says.

Faced with excess stock, Samsung began reducing production of memory chips last April, making at least the DRAM (dynamic memory) business profitable again (its market share is about 40%), although NAND flash memory Operations continue to be in the red (its share is 34%). Cuts by Samsung and other suppliers have already had a positive impact on the market: According to TrendForce, DRAM chip prices rose between 18% and 23% globally in the fourth quarter, while NAND flash prices rose between 10% and 15%. grew between.

Experts say Samsung’s results will improve this year due to a recovery in chip prices and a surge in demand for high-bandwidth memory semiconductors – key to the operation of big generative artificial intelligence models like ChatGPT. Japanese financial services firm Daiwa Capital Markets expects “a significant jump in memory manufacturers’ profits in the second half of 2024 and the first half of 2025”, while Japanese investment bank Nomura indicates that “exports of South Korean memory chip companies will increase “Up more than 100% year-on-year in the first half of 2024. Hong Kong bank HSBC, for its part, predicts a “huge improvement in Samsung’s profits” through 2024.

CCS Insight’s Wood highlights that despite the recession, “Samsung remains in a remarkable position as one of the largest consumer electronics companies on the planet.” By 2024, this expert highlights the great commitment the company is making to artificial intelligence, which, in his opinion, “will help it differentiate itself from the competition.” Samsung recently introduced the new high-end Galaxy S24 series, in which it has extensively introduced generative artificial intelligence. “This development will revive consumer interest in its products,” says Wood, adding that “it will also be boosted by the rise of folding phones (a category in which Samsung is a notable leader).”

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