▶Memory market conditions to recover in 2024; macroeconomic uncertainties expected to persist
On the 31st, Samsung Electronics reported financial results for the third quarter of the year.
Total consolidated revenue was KRW 67.40 trillion, a 12% increase from the previous quarter, mainly due to new smartphone releases and higher sales of premium display products. Operating profit rose sequentially to KRW 2.43 trillion based on sales of flagship models in mobile and demand for displays, as losses at the Device Solutions (DS) Division narrowed.
The Memory Business reduced losses sequentially as sales of high-value-added products and average selling prices somewhat increased. Earnings in system semiconductors were impacted by a delay in demand recovery for significant applications, but the Foundry Business posted a new quarterly high for new backlog from design wins.
The mobile panel business reported increased earnings on the back of new flagship model releases by significant customers, while the large panel business narrowed losses in the quarter.
The Device eXperience (DX) Division achieved solid results due to robust sales of premium smartphones and TVs. Revenue in the Networks Business declined in major overseas markets as mobile operators scaled back investments.
Harman posted a quarterly record in operating profit, led by higher sales of car audio products amid an overall increase in orders from automotive customers and consumer audio products such as portable speakers.
In the fourth quarter, the DS Division will focus on selling high-value-added products such as High Bandwidth Memory (HBM) while strengthening its technological leadership. The DX Division and Samsung Display Corporation (SDC) will seek to maintain solid profitability by focusing on premium markets.
The Memory Business plans to expand sales of HBM3 products and address the growing demand for new interfaces while increasing the portion of advanced nodes. System semiconductors are expected to post improved results on the back of new products for mobile customers.
SDC expects to maintain strong performance in the mobile panel business, driven by robust demand for premium OLED smartphone panels. The large panel business will expand QD-OLED sales, led by year-end seasonal demand.
The DX Division will strive to maintain solid profitability by reinforcing strategies for flagship smartphones and expanding sales of premium tablets and wearable products. For TVs, the Company expects solid seasonal demand for high-value-added models. The Networks Business will seek to secure new orders in overseas markets, while the Digital Appliances Business will focus on sales of premium products and strengthening the product mix.
Harman will seek to post another robust quarter by expanding sales of audio products during end-year seasonality as well as addressing the continuing demand for automotive products.
In 2024, while macroeconomic uncertainties will likely persist, memory market conditions are expected to recover. The DS Division will seek to expand sales of advanced node products and plans to meet the demand for high-performance, high-bandwidth products by increasing sales of HBM3 and HBM3E with the industry-leading HBM production capacity. For the Foundry Business, the second generation 3-nanometer (nm) Gate-All-Around (GAA) process will start mass production, and operations will begin at its new factory in Taylor, Texas. Furthermore, in the Advanced Package business, production will begin based on the multiple orders from domestic and overseas HPC customers, including charges for the Company’s turnkey service that combines logic, HBM, and 2.5D advanced packaging technologies.
For SDC, the mobile panel business plans to meet increasing demand for new applications, while the large panel business will improve profitability by adding new products and enhancing yields.
The DX Division will focus on the premium market by increasing sales of flagship smartphone models and innovative TV products. The Company plans to expand the application of AI, provide tailored hyper-connected experiences via SmartThings, and secure technologies in new areas such as XR. The network business will aim to increase revenue by seeking business opportunities overseas and reinforcing technology leadership in core 5G chips and virtualized Radio Access Network (vRAN) solutions.
The Digital Appliances Business plans to strengthen its leadership in premium segments with global launches of appliances featuring AI technology. The Company intends to continue advancing the connectivity experience between SmartThings-based digital instruments and other devices.
Harman is expected to secure orders in new areas, including automotive displays, and will address demand for high-growth products such as home audio equipment.
In the third quarter, Samsung Electronics’ capital expenditure reached KRW 11.4 trillion, including KRW 10.2 trillion spent in the Device Solutions (DS) Division and KRW 0.7 trillion in Samsung Display Corporation (SDC). The cumulative total for the January-September period is KRW 36.7 trillion, with KRW 33.4 trillion allocated to the DS Division and KRW 1.6 trillion to SDC.
The full-year capital expenditure in 2023 is expected at approximately KRW 53.7 trillion, including KRW 47.5 trillion allocated to the DS Division and KRW 3.1 trillion to SDC.
Spending on memory is expected to be concentrated in Pyeongtaek, which includes completing the P3 infrastructure and progressing the P4 framework for mid-to-long-term supply. The Company remains committed to investing in new technologies, such as securing industry-leading HBM production capacity. Foundry investments are expected to increase from last year, centering on production capacity expansion in Pyeongtaek for the EUV process and infrastructure investment in Taylor. For SDC, investments will mainly focus on expanding the capacity for flexible displays and OLED products for IT applications.
The DS Division posted KRW 16.44 trillion in consolidated revenue and KRW 3.75 trillion in operating losses in the third quarter.
For the Memory Business, the PC and mobile demand improved by increasing the adoption of high-density products in both DRAM and NAND and completing customers’ inventory adjustments. The server demand for generative AI-oriented, high-density, and high-end products remained strong compared to the sluggish demand for conventional servers.
SDC posted KRW 8.22 trillion in consolidated revenue and KRW 1.94 trillion in operating profit for the third quarter.
For the mobile display business, SDC saw a slight increase quarter-on-quarter in market demand due to seasonal demand and launches of new products by major smartphone makers. SDC achieved solid results by focusing on premium OLED, with the polarizing trend intensifying between high-end and mid-range-and-below markets.
In the fourth quarter, SDC expects sales in the mobile display business to remain relatively strong thanks to seasonal effects in the smartphone and IT markets. However, growth may be limited as lingering inflation and rising interest rates impact consumer sentiment. SDC will strive to generate similar results quarter-on-quarter by leveraging competitiveness in the high-end market and featuring launches of new foldable products.
In 2024, despite persistent and adverse macro factors, SDC will seek to secure robust results by utilizing its broad capabilities, including preemptive investments, development of differentiated technologies, and effective management to ensure stable quality and yield.
The MX and Networks businesses posted KRW 30.00 trillion in consolidated revenue and KRW 3.30 trillion in operating profit for the third quarter.
Overall market demand increased from the previous quarter, driven by a recovery in the global smartphone market. The sales and profitability of the MX Business increased quarter-on-quarter, driven by the successful launch of new flagship models. New foldable devices, tablets, and wearables recorded strong sales, supported by a stable supply, and the Galaxy S23 series, launched in the first half of 2023, also maintained solid sales momentum.
In the fourth quarter, due to seasonality, the smartphone market is expected to grow and experience intensified competition, especially in the premium segment. Competition is also likely to increase in the mass-market segment, while market uncertainties are expected to remain due to ongoing geopolitical instability.
The MX Business will focus on further enhancing the smartphone experience for customers, seeking double-digit growth in annual flagship shipments and above-market smartphone revenue growth. For tablets, an emphasis will be placed on strengthening the premium product lineup, while for wearables, the priority will be expanding sales of new models and enhancing wellness features.
The Visual Display and Digital Appliances businesses posted KRW 13.71 trillion in consolidated revenue and KRW 0.38 trillion in operating profit in the third quarter.
Overall market demand for TVs increased quarter-on-quarter in the third quarter, led by seasonality, but declined year-on-year due to various macroeconomic factors affecting consumer demand.
In the fourth quarter, demand uncertainty will remain unresolved due to various risks in the business environment, apart from the premium market, where solid demand is projected.
The Visual Display Business will continue to center on the fundamentals of TV, including picture and sound quality, as well as other features highly valued in the market, to allow customers to enjoy differentiated screen experiences.
The link to the summary of this article in Korean is as below.
▶삼성전자 3분기 영업이익 2조 4336억원…반도체 적자폭 줄었다
By_BK Min, KDFN kdf@kdfnews.com
