Samsung Electronics Q3 Operating Profit Plunges 31.4%... Quarterly Revenue Hits Record High (Update)

Semiconductor Operating Profit Halved to 5.12 Trillion Won
Strong Sales of Flagship Smartphones
Foundry Panel Records Highest Quarterly Revenue
"Expect Partial Demand Recovery Next Year"

Photo by Yonhap News

[Asia Economy Reporter Han Yeju] Samsung Electronics recorded an 'earnings shock' as its operating profit for the third quarter of this year decreased by more than 30% compared to the same period last year. The biggest hit came from the DS (semiconductor) division, where operating profit was halved due to sluggish market conditions. However, sales reached a quarterly record high.

Samsung Electronics announced on the 27th that its consolidated operating profit for the third quarter of this year was 10.852 trillion KRW, down 31.4% from the same period last year. This marks the first decline in operating profit compared to the same period last year in 2 years and 9 months since Q4 2019.

During the same period, sales recorded 76.78 trillion KRW, an increase of 3.8%. This is the highest level for a third quarter and is expected to mark the highest annual sales record again following last year. Samsung Electronics surpassed 70 trillion KRW in quarterly sales for the first time in Q3 last year and continued the record-breaking sales streak for three consecutive quarters through Q1 this year. Although Q2 sales slightly decreased to 77.2 trillion KRW, it was still the highest on a quarterly basis.

The increase in sales was driven by strong sales of flagship smartphones and record quarterly sales in foundry (semiconductor contract manufacturing) and small-to-medium-sized panels. On the other hand, overall operating profit shrank as the memory business performance contracted due to a global semiconductor demand slowdown.

By division, the DS division recorded sales of 23.02 trillion KRW and operating profit of 5.12 trillion KRW, about half of the 10.06 trillion KRW recorded in the same period last year. As a result, the top position in global semiconductor sales, which Samsung had reclaimed from Intel after three years last year, was handed over to Taiwan's TSMC, the leading foundry company. TSMC recently announced third-quarter sales of 613.1 billion TWD (approximately 27.5 trillion KRW).

In memory semiconductors, server demand was more affected than expected by customer inventory adjustments, and consumer demand for mobile and PC products declined. System LSI also saw a drop in performance due to weakened demand for consumer product components. However, foundry achieved record performance due to demand for advanced processes and positive currency effects.

Smartphones (MX) and displays (SDC) posted solid results. The display division recorded third-quarter sales of 9.39 trillion KRW and operating profit of 1.98 trillion KRW. The release of new products by smartphone manufacturers and currency effects led to significant growth in small-to-medium-sized panel performance. The DX (Device eXperience) division posted third-quarter sales of 47.26 trillion KRW and operating profit of 3.53 trillion KRW. MX was supported by strong sales of flagship products such as foldables and wearables.

The VD (Visual Display) division strengthened market leadership through expanded premium-focused sales but saw profit decline due to decreased demand and increased costs. Home appliances improved sales mix but continued to face material and logistics cost burdens amid sluggish consumer demand. Harman achieved its highest quarterly performance with steady demand for connected car technologies and solutions, increased customer orders, and rising consumer audio sales.

A Samsung Electronics official explained, "The strong dollar negatively affected the DX business, but the positive impact on the components business outweighed this, resulting in an overall positive effect on operating profit of about 1 trillion KRW compared to the previous quarter."

For the fourth quarter, global IT demand weakness and memory market downturn are expected to continue. Accordingly, Samsung Electronics plans to maintain performance improvement in foundry and SDC while continuing efforts to secure profitability in DX.

The company stated, "Although macroeconomic uncertainties are expected to persist in 2023, some demand recovery is anticipated. DS will respond to high value-added product demand and expand advanced processes and new applications, while DX will continue to strengthen premium leadership and lineup, maximizing customer experience through continuous expansion of multi-device connectivity experiences based on SmartThings across mobile, TV, and home appliances."

Meanwhile, this performance is similar to the preliminary results announced by Samsung Electronics on the 7th (sales of 76 trillion KRW, operating profit of 10.8 trillion KRW).

This content was produced with the assistance of AI translation services.