Samsung: Tax breaks prevent a disaster
Sales and profits of almost all of Samsung’s businesses collapsed in late 2022. Although total sales in the fourth quarter fell by only 8 percent to 70.46 trillion won (52.68 billion euros at the current exchange rate), operating profit halved to 4.31 trillion won (3.2 billion euros).
As with virtually all tech companies, the strong start to the year prevented a worse end to the year. Calculated over the 12 months, Samsung took in 302.23 trillion won (225.92 billion euros), up 8 percent from 2021. Operating profit fell 16 percent to 43.38 trillion won (32.42 billion euros).
Trillions plus thanks to tax cuts
Two factors made Samsung’s annual report beautiful: Firstly, the strong US dollar increased purchasing power in North America. The company attributes half a trillion won of operating profit to positive currency effects in the fourth quarter of 2022, which is more than 10 percent.
On the other hand, Samsung benefited massively from a South Korean tax reform that came into force on January 1, 2023. Among other things, dividends from foreign subsidiaries are no longer taken into account in sales tax.
Just because Samsung doesn’t have to pay previous tax provisions and can therefore post it again in net profit, the latter more than doubled to 23.84 trillion won (17.8 billion euros) in the fourth quarter of 2022. The annual report lists negative sales tax worth 18.79 trillion won ($15 billion). For the full year, net profit increased by almost 40 percent to 55.65 trillion won (41.58 billion euros) thanks to the tax reform.
Smart-TVs im Minus
Samsung’s core divisions Device Experience (DX) and Device Solutions (DS) have recently run catastrophically. Samsung DX includes almost all electronic devices: The group around smart TVs and PC monitors slipped into the red first – they achieved a minus of 60 billion won (44.8 million euros).
The pure display panel business, on the other hand, was impressive: Samsung Display (SDC) grew 38 percent year-on-year to an operating profit of 1.82 trillion won (1.36 billion euros) in the fourth quarter. SDC sells its own panels to Samsung Electronics and all sorts of third-party manufacturers.
Meanwhile, smartphones and network products kept the DX division afloat with an operating profit of 1.7 trillion won (1.27 billion euros). A focus on high-margin premium devices should improve the numbers in the future – the smartphone series Galaxy S23 is explicitly mentioned.
(Image: Samsung’s sales and operating profit breakdown by division.)
97 percent collapse in semiconductors
Samsung DS includes the entire semiconductor business, including memory production, the processor division around all Exynos CPUs and chip order manufacturing. Operating profit fell by an incredible 97 percent to just 270 billion won (201.5 million euros). In particular, the low prices for SDRAM and NAND flash memory blocks made things difficult for the DS group.
There were bright spots in mobile processors with an unspecified full-year sales record and in chip custom manufacturing with a record quarter. A “European premium OEM” is said to have received the first test samples; Samsung has entered into a cooperation with a US car manufacturer to develop automotive hardware.
Samsung does not expect the market to recover until the second half of 2023. In the case of storage, the company describes the demand until then as “short-term concern”. Samsung’s shares fell 4 percent after the company’s figures were announced.
(mma)
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