Samsung expects profits from semiconductor business to be halved in 2023

Samsung’s Device Solutions (DS) division, which operates Samsung Foundry, System LSI, and Memory Division, is expecting its operating profit in 2023 to be around KRW 13.1 trillion, reports South Korean publication The Elec. Reportedly, the figure was shared by the company in a note sent to its employees on Wednesday.

While 2023 is looking bad for Samsung, 2024 could turn things around

If the prediction turns out to be true, Samsung’s annual operating profit from the semiconductor business in 2023 will be half of what analysts predict it to be in this year, which is around KRW 26 trillion. The significant drop in the operating profit will be a direct result of the ongoing down cycle in the chip industry.

Reportedly, Samsung’s MX division will not use Exynos SoCs in the company’s flagship phones anymore, which could also be why 2023’s predictions for the DS division look bad. While 2023 is looking bad for Samsung, analysts predict the chip market to improve in 2024, and that’s when things could start looking better as the company is expected to get the contract to manufacture Google’s Tensor G3 processor and Qualcomm’s Snapdragon 8 Gen 3 chipset on its 3nm GAA node.

Samsung employees will get lower bonuses in 2024

Samsung pays performance incentives to its employees at the beginning of a year based on the employee’s performance last year. This bonus is paid from the profits exceeding the company’s target for the prior year. Up to 20% of surplus profits are used to pay bonuses, and employees can get up to 50% of their annual salary as a performance incentive.

Since performance incentives are based on the company’s operating profit, Samsung has to share those figures with its employees along with predictions for the next year so that they know what to expect in the future. The note regarding bonuses that the company shared this year mentions the operating profit to be around KRW 13.1 trillion in 2023.

If Samsung’s DS division meets its expected operating profit in 2023, employees will get a bonus between 5% and 11% in January 2024. For employees to get the maximum bonus, which is 50%, Samsung needs to achieve an operating profit of KRW 28 trillion, which is impossible given the current crisis in the semiconductor market.

Profits from the smartphone division are also expected to drop in 2023

Samsung has also recorded lower operating profits from the DX and MX divisions in Q3 2022 due to increasing component prices. The Galaxy S23 will use even costlier components, but Samsung will reportedly offer it for the same price as the Galaxy S22, and that means the mobile division will also see lower profits in 2023.