The supply glut in the semiconductor market and the resulting price drops hit Samsung hard. The semiconductor division brings in the most amount of profit for the company. When that part of the business faces headwinds, Samsung's bottom line takes a major hit.
That has been the case for almost two years now, but there's light at the end of the tunnel for Samsung. Market analysts believe that Samsung will post its smallest profit drop in six quarters, largely due to the rebound in chip prices.
Samsung's profit is recovering nicely, helped by chip price hikes
Samsung is due to announce its preliminary earnings tomorrow and is expected to post a 14% fall in Q4 2023 profit. Analysts estimate that the company's operating profit likely fell to $2.82 billion in the October-December quarter. It signals a recovery in the company's fortunes that has seem some pretty steep profit drops in recent quarters.
The chip division is expected to have trimmed its loss to around $1 billion, down significantly compared to the higher losses reported in the second and third quarter of 2023. The previous year was hard for Samsung's chip division as the slow demand for gadgets resulted in a supply glut that caused semiconductor prices to crash.
Fortunately for Samsung, there's an industry-wide recovery of prices for DRAM and NAND flash chips. Mobile DRAM prices have already surged by 20% in Q4 2023 while NAND prices are up around 15%. Samsung has also been cutting production to manage supply and reduce its inventories.
It's also going to be interested to see how Samsung's mobile division performed, particularly in its mission to sell foldable phones, as the company has ambitious goals to significantly increase the sales of its Galaxy Z Fold and Galaxy Z Flip foldable devices.
