Samsung’s Fourth Quarter Operating Profit Drops 34.57% as Smartphone Sales Soften

Despite a decline in operating profit, Samsung aims to rebound with high-value products and AI integration.

Samsung Electronics, the global technology giant, reported a significant drop in operating profit for the fourth quarter of the fiscal year. The decline, in line with the company’s earlier guidance, was primarily attributed to weakened smartphone sales. However, Samsung remains optimistic about the future, with plans to focus on high-value products and the integration of artificial intelligence (AI) in its offerings.

Operating Profit and Revenue:

Samsung’s operating profit for the fourth quarter stood at 2.82 trillion Korean won ($2.13 billion), a 34.57% decrease from the same period the previous year. The company’s revenue for the quarter was 67.78 trillion Korean won ($51 billion), a 3.8% decline compared to the previous year. These figures align with the guidance provided by Samsung earlier this month.

Challenging Smartphone Market:

Samsung’s smartphone sales and profit experienced a decline in the fourth quarter, primarily due to the diminishing impact of new models launched earlier in the year. In 2023, Apple surpassed Samsung as the world’s leading smartphone manufacturer, capturing a 20% market share. Bryan Ma, Vice President of Devices Research at International Data Corporation (IDC), explained that Apple’s success was driven by a focus on the premium segment, while Samsung’s broader product range affected its market position.

Shifting Towards Premium:

Despite slipping to the second position globally, Samsung witnessed an increase in the average selling price of its smartphones by approximately $100 from 2020 to 2023. This shift towards premium devices reflects the changing dynamics of the smartphone market. Samsung aims to capitalize on this trend and drive higher margins by continuing to offer high-value products.

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Recovery through AI Integration:

Samsung plans to leverage its new AI-enabled Galaxy S24 smartphones, set to launch soon, to boost sales and establish itself as a leader in the AI smartphone market. The company aims to strengthen AI functionalities across its product range, capitalizing on the rising demand for advanced products and generative AI. Additionally, Samsung expects a moderate improvement in earnings in the first half of 2024, followed by a more significant improvement in the second half of the year.

Conclusion:

Samsung’s fourth-quarter results reflect the challenges faced by the company in the smartphone market. However, the decline in operating profit has not dampened Samsung’s determination to rebound. By focusing on high-value products and integrating AI into its offerings, Samsung aims to regain its market position and establish itself as a leader in the AI smartphone market. As the company looks ahead to 2024, it anticipates a recovery in memory chip prices and a continuation of its efforts to capture the demand for advanced products.