Samsung Reduces Semiconductor Deficit, Savior AI Semiconductor Is Coming (Comprehensive)

Q4 Operating Profit Recovery
Inventory Reduced and Performance Recovered Due to Production Cuts
Full-Scale HBM3E Production in Second Half
Stock Price Up 26% Over One Year

Samsung Electronics' recording of the lowest operating profit in 15 years since the global financial crisis is largely due to the semiconductor downturn. However, the consensus is that this year, demand is expected to recover, centered on high-bandwidth memory (HBM) semiconductors, leading to a potential rebound in performance. From the second half of this year, mass production of the 5th generation product HBM3E will be in full swing, and through this, it is anticipated that Samsung will regain leadership in AI semiconductor competition against rivals such as SK Hynix and Micron. There is also high anticipation for the AI smartphone Galaxy S24, which will be announced this month.

The notable point in Samsung Electronics' performance announced on the 9th is the fourth-quarter results. Although the provisional operating profit for last year remained in the 6 trillion won range, which was below expectations, the quarterly figures show a clear recovery trend in the second half of the year. Looking at the quarterly operating profits last year, it sharply dropped to 640 billion won in Q1 but slightly increased to 670 billion won in Q2. However, in Q3, which marked the start of the second half, it jumped significantly to 2.44 trillion won, and in Q4 to 2.8 trillion won. This is analyzed as a recovery in semiconductor performance due to reduced inventory from memory semiconductor production cuts.

Samsung Electronics Chairman Lee Jae-yong visits the Samsung Electronics Cheonan Campus on February 17 last year to tour the packaging line and review business strategies.
[Photo by Yonhap News]

The market expects Samsung Electronics to reduce the scale of DRAM production cuts. As DRAM prices are also rising, demand this year is expected to exceed supply. This suggests a high possibility of increasing production to meet demand.

Go Young-min, a researcher at Daol Investment & Securities, estimated Samsung Electronics' semiconductor loss in Q4 at 1.727 trillion won (memory -1.17 trillion won, non-memory -557 billion won). Researcher Go stated, "With the full effect of production cuts, and the expansion of sales of legacy products in Q4, the speed of inventory reduction may accelerate, and visible inventory normalization is expected in the first half of this year. If customer quality certification (qual) testing for HBM3E is completed as planned in the first half, HBM semiconductors will significantly contribute to overall performance from the second half."

Samsung Electronics plans to meet customer demands by building a portfolio of ultra-large AI memory semiconductors such as HBM. Bae Yong-cheol, Vice President and Head of Product Planning at Samsung Electronics' Semiconductor (DS) Division Memory Business Unit, announced the day before that they would unveil a large portfolio of ultra-large AI memory semiconductors, including HBM3E Shinebolt and 32Gb Double Data Rate (DDR)5, at the world's largest electronics and IT exhibition, 'CES 2024.' The HBM3E Shinebolt is a product that improves performance and capacity by more than 50% compared to the existing HBM3 product. Increasing HBM3E supply to world-leading AI semiconductor companies such as Nvidia and AMD is expected to significantly improve the DS division's performance.

The estimated operating profit for the Device Experience (DX) division, which handles mobile and home appliances, in Q4 last year is in the 2 trillion won range according to securities analysts. Demand recovery for TVs and home appliances was delayed, and smartphone shipments decreased due to the characteristics of Q4. This year, Samsung plans to launch a large number of AI products such as the on-device AI phone 'Galaxy S24,' Samsung AI Screen, AI-equipped Bespoke appliances, and AI laptop 'Galaxy Book4,' declaring 'AI for Everyone' to aim for a rebound. The on-device AI phone refers to a smartphone that operates AI using a chip embedded in the device without connecting to the internet.

Samsung Display's operating profit estimate is in the 2 trillion won range, and the automotive electronics affiliate Harman's estimate is 400 billion won. Display is expected to deliver solid performance as strong demand for flagship smartphones from major customers continues and component demand for new products from customers is expected to increase this year.

Samsung Electronics' stock price is also on the rise. The closing price the day before was 76,500 won, up 26% compared to a year ago. Kim Kyung-jun, CEO Score CEO, said, "Samsung Electronics appears to be determined to save even 10 million won to reduce the DS division's deficit in the accounting books. The market's positive evaluation of the reduction in the DS division's deficit is a positive factor for the recent rise in stock price."

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