Seoul, South Korea – Samsung Electronics, a global technology giant, reported a significant decline in its operating profit for the fourth quarter of 2023, underscoring the ongoing challenges faced by the semiconductor industry. The company's earnings fell short of market expectations, driven by a steep drop in DRAM prices and increased research and development costs.

The South Korean tech conglomerate's semiconductor division, which has traditionally been a major growth driver, faced a particularly tough quarter. The division's operating profit is estimated to have contracted significantly compared to the previous quarter, primarily due to weak demand for conventional DRAM chips and intensifying competition from Chinese rivals.

Moreover, Samsung's delay in ramping up production of high-bandwidth memory (HBM), a crucial component for AI applications, has further hindered its performance. Despite the growing demand for HBM, Samsung has been struggling to meet its production targets.

The company's overall performance was also impacted by the sluggish smartphone market, with its mobile division reporting a decline in operating profit. Increased competition from Apple and Chinese smartphone makers in emerging markets added to the pressure.

"The company's fourth-quarter results were affected by weak demand for conventional products and increased investments in advanced process technology," Samsung said in a statement.

Analysts expect Samsung's challenges to persist in the near term, but anticipate a gradual recovery in the second half of the year. The recovery is expected to be driven by a stabilization in DRAM prices and increased demand for HBM.

"We expect to see a turnaround in Samsung's semiconductor business starting from the second quarter," said Park Yu-ak, a researcher at Kiwoom Securities. "DRAM prices are expected to stabilize as inventory levels normalize, and the company's HBM3E business is expected to gain traction."

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