Seoul [South Korea], January 9: As Samsung Electronics announced its fourth-quarter earnings on the 6th, which are far below the market outlook, securities firms expect that Samsung Electronics will cut memory chip production.
Despite Samsung Electronics' earnings shock, its share price is also rising for three consecutive days due to such expectations.
Samsung Electronics announced that its consolidated operating profit in the fourth quarter of last year was 4.3 trillion, down 69% from a year ago (13.8 trillion won).
fell by nearly 70%, is attributed to a decrease in demand for semiconductors due to global economic slowdown.
This is 31.2% less than the market forecast of 6.24 trillion won expected by financial information company YonhapInfomax.
Samsung Electronics did not disclose its earnings by division, but it is believed that overall earnings decreased due to a decrease in semiconductor sales.
Lee Seung-woo, head of Eugene Investment & Securities Research Center, said, "Samsung Electronics' earnings shock in the fourth quarter was affected by the semiconductor market slowdown. It is estimated that some inventory losses were reflected."
Hwang Seung-taek, head of Hana Securities RsearchCenter, said, "Despite high sales, the low profit is due to low margins in the semiconductor sector. Falling sales price and demand would have affected earnings."
However, securities firms are not very concerned about Samsung's earnings. This is because a decrease in earnings was predicted amid the recent semiconductor market recession.
Securities firms expect Samsung may cut its memory production.
Although global chip makers have decided to cut their production and reduce investment due to worsening business conditions last year, Samsung Electronics has maintained that there would be no artificial reduction.
Lee said, "Currently, there is no market expectation for earnings, so it is meaningless to predict Samsung Electronics' profit this year. What is important now is to reduce inventory quickly to improve profits next year."
"Samsung Electronics needs to face the current situation," he added. "If Samsung Electronics does not cut its production, the current down cycle of the semiconductor industry will be extended further, and expectations that earnings will recover this year will also disappear."
Meanwhile, Samsung Electronics' stock price continued to rise.
As of 11:03 a.m., Samsung Electronics' share was traded at 58,500 won, up 0.52% from the previous trading day, continuing to rise for 3 consecutive days.
Some analysts say that Samsung Electronics' DX (Device Experience) division will offset a decrease in earnings of DS (Device Solutions) division and SDC (Display) division.
Source: Global Economic