Samsung’s Display Business Thrives, but Mobile and Display Divisions Face Challenges
Samsung Electronics predicts that the chip shortage will worsen this year, driven by the surge in artificial intelligence (AI) demand, which benefits its primary chip business but poses a hurdle for other units like smartphones and displays.
Record-Breaking Profits in Display Business
Samsung announced on Thursday that its operating profits more than tripled to reach a record high in the fourth quarter, highlighting the strong pricing power of the world’s leading memory chip manufacturer amid a race to develop AI that tightens chip supply and drives up prices.
Rising Chip Prices Impact Mobile and Display Businesses
However, Samsung warned that the increase in memory chip prices is raising costs for its smartphone and display businesses, which have Apple and Samsung as clients. This led to a 1.2% drop in its stock after this year’s strong rebound.
“The significant shortage of memory products across all sectors is expected to persist for now,” said Kim Jaejune, executive of Samsung’s memory chip business, during a post-earnings conference with analysts.
Kim anticipates limited supply expansion in 2026 and 2027, while AI-related demand will remain robust.
Financial Performance Highlights
Samsung recorded operating profits of 20 trillion won (USD 13.98 billion) in the October-December period, aligning with estimates and surpassing the 6.49 trillion won from the previous year.
The South Korean company’s revenue increased 24% to reach 93.8 trillion won compared to the previous year.
Operating profits from Samsung’s chips business, its primary revenue source, soared 470% to reach a record high of 16.4 trillion won compared to the previous year, accounting for more than 80% of its total profits.
Mobile Business Faces Challenges
Samsung’s mobile and display divisions warned of a “difficult year” due to cost pressures from rising memory chip prices.
“We plan to collaborate with our key partners to ensure a stable product supply and drive resource efficiency to minimize profit erosion risk,” said Cho Seung, executive of Samsung Mobile, during the conference. Co-CEO TM Roh described the severe chip shortage as “unprecedented” in an interview with Reuters, adding that price hikes were not ruled out.
“How the division defends margins as the year progresses will be a key issue,” said Ko Yeongmin, analyst at Daol Investment & Securities.
The display business also anticipates weakening smartphone demand in the current quarter due to rising chip prices and expects clients to push for price reductions.
Display Business Profits Double
Samsung’s display business profits more than doubled to reach 2 trillion won in the fourth quarter, thanks to strong sales of Apple’s iPhone 17 series.
Samsung stated it is already producing its next-generation high bandwidth memory (HBM) chips, HBM4, and plans to ship them in February at the request of a “key customer,” likely referring to Nvidia.
It also mentioned that customers are completing qualification tests.
Samsung expects total HBM revenue to more than triple this year, as it has secured orders for its full HBM capacity for the year.
Key Questions and Answers
- What is the main issue Samsung is facing? Samsung anticipates a worsening chip shortage due to increased AI demand, which benefits its primary chip business but poses challenges for other units like smartphones and displays.
- How did Samsung’s profits perform in Q4 2022? Samsung’s operating profits more than tripled to reach a record high of 20 trillion won (USD 13.98 billion) in Q4, with its chips business accounting for more than 80% of total profits.
- What challenges do Samsung’s mobile and display divisions face? These divisions are grappling with rising memory chip prices, which increase costs and put pressure on profit margins. Collaboration with key partners is planned to ensure stable product supply and drive resource efficiency.
- How did Samsung’s display business perform in Q4 2022? Profits from Samsung’s display business more than doubled to reach 2 trillion won in Q4, driven by strong sales of Apple’s iPhone 17 series.
- What are Samsung’s plans for HBM4 chips? Samsung is already producing its next-generation high bandwidth memory (HBM) chips, HBM4, and plans to ship them in February at the request of a key customer, likely Nvidia.
