June 23, 2024

Samsung Electronics Co Ltd’s quarterly report on Tuesday revealed its Q4 operating profit will likely drop by 35%. The firm attributed the decline to persistently weak consumer demand across multiple segments of its business despite the improved prices of memory chips.

Samsung’s preliminary results revealed an operating profit of 2.8 trillion won ($2.13 billion) between October and December, down from 4.31 trillion won in the previous year.

Samsung’s Fourth Quarter Profit Decline

Samsung chip contract manufacturing, mobile processors, television, and home appliance businesses underperformed, contributing to the disappointing results. Analysts noted that Samsung’s mobile business likely saw a decline in shipments of its flagship foldable models, leading to a slight dip in earnings.

Despite the weak performance, this marks Samsung’s smallest year-on-year profit drop in five quarters, following a report of a 31% drop in Q3 2022. It’s a sign of improvement from the severe industry downturn caused by a memory chip glut and slow demand for gadgets in the previous year.

Moreover, Samsung’s chip division is expected to have reduced its fourth-quarter loss against the 3.75 trillion won and 4.36 trillion won in Q3 and Q2 2023, respectively.

It also recorded an improvement in memory chip earnings, especially in the DRAM business, returning to a profit, which recorded an estimated price growth of 18% to 23%, as reported by TrendForce.

The NAND flash chip price, on the other hand, increased 10%-15%. More so, a recovery in memory chip prices is anticipated to continue, with the company set to release detailed earnings on Jan. 31.

Notably, investors are eager to learn about Samsung’s plans to stimulate demand for more memory chips per device, including strategies involving on-device artificial intelligence, later this month.

The company’s shares closed 2.4% lower, contrasting with a 0.3% drop in the broader market. Meanwhile, rival LG Electronics also faced challenges, posting a fourth-quarter operating profit of 313 billion won, well below estimates.

The intensifying competition and increased spending on marketing in the television and home appliance markets were cited as factors affecting LG’s performance.

Apple’s Market Events 

Besides the losses in profit for Samsung and LG, Apple also faced its fourth consecutive quarterly revenue dip, reporting $89.5 billion for the quarter ending in September, a 1% decrease compared to the previous quarter.

The decrease, though anticipated, surpassed Wall Street expectations of $89.28 billion.

Notably, Apple achieved record-breaking quarterly revenue of $43.81 billion from iPhones and $22.3 billion from services, as highlighted by Apple CEO Tim Cook.

But looking beyond the decrease in sales, the company’s stock has recorded over 2% increase ahead of the scheduled earnings call, contributing to a year-to-date rise of approximately 32.5%.

Notably, this announcement came at a time when the company faced its busiest quarter as the holiday season drew closer.

At the time, investors were eagerly anticipating insights into the quarter’s performance, demanding the status of the recently released iPhone 15, which the company introduced just a few days leading up to the quarter’s conclusion.

During the same period, there was a notable year-on-year decline of 34% in Mac revenue, amounting to approximately $7.6 billion, with iPad revenue also dipping by 10% simultaneously.

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