Samsung: 2023 Losses, Awaits 2024 Recovery

In light of the prevailing global economic deceleration and subdued demand for storage solutions, Samsung Electronics forecasts a semiconductor-related business deficit exceeding KRW 130 trillion (approximately USD 100 billion) for the fiscal year 2023. This marks the first occasion of Samsung Electronics sustaining losses for four consecutive fiscal quarters.

Nevertheless, as storage prices show signs of recovery in the latter half of 2023 and optimism arises due to depleting customer storage inventories, Samsung's semiconductor business losses are expected to converge in the fourth quarter of 2023. Envisioning an upswing in storage demand in the fiscal year 2024, Samsung is poised for an enhancement in its semiconductor business, with the dual objectives of reversing losses and achieving an annual operating profit surpassing KRW 120 trillion.

Industry projections anticipate Samsung's fourth-quarter revenue for the fiscal year 2023 to be KRW 69.6 trillion (USD 53.5 billion), reflecting a marginal year-on-year decrease of 1.1%, coupled with an operating profit of KRW 35 trillion, indicating a 17.2% decline. The full-year revenue for 2023 is projected to be KRW 260.8 trillion, constituting a 13.6% year-on-year decrease, with an annual operating profit estimated at KRW 7.3 trillion—a decline of 83.1%. This performance marks Samsung's most subdued since the 2008-2009 financial crisis, with annual revenue falling below KRW 100 trillion.

Samsung attributes its fiscal year 2023 performance downturn to significant losses in its Device Solutions (DS) division, responsible for the semiconductor business. Cumulative losses for the initial three quarters of 2023 in this division are expected to exceed KRW 120 trillion. Analysts predict a reduction in DS division losses to approximately KRW 970 billion in the fourth quarter, compared to losses of KRW 4.5 trillion, KRW 4.3 trillion, and KRW 3.7 trillion in the preceding three quarters, signifying a gradual market improvement as production cuts and inventory depletion stimulate a rebound in storage prices.

Despite the challenges faced in the fiscal year 2023, Samsung's semiconductor business anticipates a positive trajectory in fiscal year 2024, with the company envisioning a more than fourfold increase in annual operating profit to reach KRW 33 trillion and annual revenue approaching KRW 302.7 trillion.

Additionally, the DS division's operating profit is forecasted to transition from a fiscal year 2023 loss of KRW 13-14 trillion to a profit of KRW 12 trillion. The anticipated expansion of High Bandwidth Memory (HBM) supply is expected to enhance the profitability of Samsung's DS division, with industry insiders hinting at a potential doubling of Samsung's HBM capacity to alleviate concerns regarding HBM3 supply shortages.

Looking forward to fiscal year 2024, Samsung plans to launch the LPDDR5X Enhanced version in the first half of the year and commence mass production of the new generation Low Latency Bandwidth (LLW) DRAM. Simultaneously, Samsung's second-generation 3nm GAA is set to begin large-scale production at the Taylor factory in the latter half of fiscal year 2024, currently under construction and expected to employ 3nm and 4nm processes for production.