A Swing & a Miss
Samsung Electronics (005930.KS) relies on its DS division (Semiconductors) to generate operating margins that offset the lower (10% or less) margins of its DX division (Phones, Networks, TVs), despite the fact that DX generates ~60% of the company’s sales, against DS’s 37% to 43% of sales. When the DS division is operating correctly, as it did for most of 2022, it can generate ~30% of company sales but with an operating margin between 22% and 35%. Unfortunately, the semiconductor business has not been nearly as good for Samsung as it has been for those not as highly focused on the memory market, and based on Samsung’s just released guidance for 4Q, things actually got worse rather than better in 4Q.
Samsung guided the 4th quarter to 75 trillion won ($51.4b US), down 5.1% q/q but up 10.7% y/y. This is 3.2% below consensus. Operating profit guidance was worse at 6.5 trillion won ($4.5b US), down 29.2% q/q but still up 130.5% y/y, pointing out how bad things were a year ago. Operating margin will come in at ~8.7%, against 11.6% last quarter and 4.2% a year ago, but the guidance for operating income was 27.5% below consensus. Samsung does not give detail as to the divisional breakdown until its call later this month, but it is thought that the delay in getting its High Bandwidth Memory (HBM3E) qualified at Nvidia (NVDA) as the reason, although we, as did others, thought that the semi division would have done a bit better, even with the delay. Not a good start for 4Q in the CE space.
That said, LG Electronics also gave 4Q guidance, and while sales were 22.78 trillion won ($15.6b US) which is fractionally up q/q and in line with consensus, operating profit, at 146.1 billion won ($100.4m US), far lower than the consensus of 447.9 billion won ($307.2m US) and over 50% lower than last year’s 4Q. LG also does not give details but did indicate that the rise in shipping costs and one-time costs associated with the company’s treasury stock retirement program, along with global economic uncertainties, all contributed to the shortfall. On the positive side LG’s home appliance segment was the biggest contributor to sales and operating profit.
Samsung guided the 4th quarter to 75 trillion won ($51.4b US), down 5.1% q/q but up 10.7% y/y. This is 3.2% below consensus. Operating profit guidance was worse at 6.5 trillion won ($4.5b US), down 29.2% q/q but still up 130.5% y/y, pointing out how bad things were a year ago. Operating margin will come in at ~8.7%, against 11.6% last quarter and 4.2% a year ago, but the guidance for operating income was 27.5% below consensus. Samsung does not give detail as to the divisional breakdown until its call later this month, but it is thought that the delay in getting its High Bandwidth Memory (HBM3E) qualified at Nvidia (NVDA) as the reason, although we, as did others, thought that the semi division would have done a bit better, even with the delay. Not a good start for 4Q in the CE space.
That said, LG Electronics also gave 4Q guidance, and while sales were 22.78 trillion won ($15.6b US) which is fractionally up q/q and in line with consensus, operating profit, at 146.1 billion won ($100.4m US), far lower than the consensus of 447.9 billion won ($307.2m US) and over 50% lower than last year’s 4Q. LG also does not give details but did indicate that the rise in shipping costs and one-time costs associated with the company’s treasury stock retirement program, along with global economic uncertainties, all contributed to the shortfall. On the positive side LG’s home appliance segment was the biggest contributor to sales and operating profit.
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