In
its earnings guidance disclosed on January 7, Samsung estimated fourth
quarter consolidated revenues would reach approximately 59 trillion won
with consolidated operating profit of approximately 8.3 trillion won.
The
fourth quarter results brought Samsung’s full year 2013 revenue to an
all-time high of 228.69 trillion won, up 14 percent from the previous
year. Year-end net income registered 30.47 trillion won and Samsung
netted 36.79 trillion won in operating profit, a 27-percent on-year
increase.
In
2013, Samsung maintained its market leadership in mobile devices as
evidenced by its smartphone market shares of over 30-percent for both
developed and emerging markets, and a two-fold surge in tablet sales
from the previous year due to the release of new products such as GALAXY
Tab 3 and GALAXY Note 10.1 (2014 Edition). The solid performance is
also the result of our efforts to strengthen customer touch-points with
shop-in-shop experiences.
As
for TV shipments, Samsung saw robust growth in developed markets in the
quarter thanks to premium products that boosted growth by 90 percent
from the July-September quarter. Orders for 60-inch and larger TVs
recorded 80-percent growth while demand for Smart TVs grew by more than
60 percent in the fourth quarter.
Profit
margins for Digital Appliances Business remained steady in the quarter
led by increased sales of premium products in developed markets.
On
the components’ side, inventory adjustments and a retreat in panel
price took their toll on the Display Panel segment’s overall earnings
but increased shipments of IT and UHD TV panels were a silver lining.
For
the Memory business, revenue in the fourth quarter landed in positive
territory with cutting-edge process and high-margin DRAM and NAND Flash
memory chip products.
“Amid
macroeconomic uncertainties such as a strong Korean won and increased
concerns over possible quantitative easing (QE) tapering in the U.S.,
our earnings were lower than what the market expected due to a negative
currency impact of around 700 billion won and a significant one-off
expense of about 800 billion won, however, fourth quarter operational
results were respectably strong. Looking at the quarterly earnings
trend, we expect 2014 to follow last year’s pattern of a weak first half
and a strong second half as usual,” said Robert Yi, Senior Vice
President and Head of Investor Relations.
For
the first quarter, it will be challenging for Samsung to improve its
earnings in the first quarter as the weak seasonality of the IT industry
will put pressure on demand for components and TV products.
Looking
into this year, in finished products, Samsung is looking to maintain
its leadership in the smartphone business by leveraging its expanded
product portfolio across diverse regional markets and price points.
Samsung
is looking to increase its business footprint in the wearable device
category with innovative products such as GALAXY Gear and it will ramp
up its tablet lineup with mid- to low-end models and larger screens.
Driven
by high value-added premium products including UHD, curved and 60-inch
and over TVs, Samsung is confident it will outperform the market. This
year looks more promising due to the upcoming world soccer championship
in Brazil and the anticipated expansion of the UHD TV market.
On
the components’ side, we will secure profitability in the semiconductor
market with high-margin, state-of-the-art memory processes, diverse
product offerings and the production of V-NAND. Samsung will try to stay
ahead of the race in logic chips or System LSI with 20-nanometer-class
AP and by solidifying growth potential by migrating to the
14-nanometer-class process.
We
anticipate increased orders of large LCD panels this year as we look
forward to stronger demand for high-end TVs that are curved or feature
UHD resolution. Meanwhile, Samsung plans to use OLED panels in products
other than smartphones which will further our profit margins.
Capital
expenditure in fiscal year 2013 totaled 23.8 trillion won, which was in
line with our previously announced spending plan. For the Semiconductor
Business, Samsung executed 12.6 trillion won and 5.5 trillion won was
injected for upgrades in the Display Panel segment.
Specifically,
investments were made in LCD panel fabrication facilities and in
capacity expansion for OLED panels. Process migration to the 20-nanometer-class process for
DRAM and System LSI and improvements to NAND chip production plants
took up the bulk of this year’s capex. Total capex for this year will be
similar to the level of 2013.
The
Board of Directors approved a year-end dividend of 13,800 won per
share. The total dividend paid out for 2013 is 14,300 won per share,
which is about 1-percent of the average share price in 2013 and a
79-percent increase from the year earlier.
Following
a comprehensive review, Samsung aims to increase total shareholder
returns proportionate to the yearly free cash flow (FCF), compared with
2013.
Memory Business Delivers Strong Results
Samsung’s
Semiconductor businesses – including Memory and System LSI – posted
1.99 trillion won in operating profits for the quarter on 10.44 trillion
won in consolidated revenue. The memory chip business claimed the bulk
of sales with 6.52 trillion won in revenue, a 2-percent increase in
gains quarter-on-quarter.
The
chip business enhanced cost competitiveness by expanding low-power and
high-performance DRAMs based on the 20-nanometer-class process. As for
NAND, the 10-nanometer-class portion increased while profit was enhanced
through sales expansion of solution products, including SSD.
As
for System LSI, while overall demand for high-end mobile components was
lower than expected, fourth quarter revenue slightly increased compared
to the third quarter led by increased AP shipments for new products.
Heading into 2014, while
memory market supply is expected to remain tight, given limited
investments by major players, the company will expand cutting-edge
processes and increase the proportion of high value-added products in
the product mix to maximize profitability.
For
System LSI, the company expects to improve profitability by introducing
20-nanometer-class mobile AP and strengthening high-value LSI product
lineups such as high pixel CIS. In addition, we will prepare for future
growth by successfully migrating towards 14-nanometer-class.
Mobile Business Continues Solid Momentum
The
IT & Mobile Communications (IM) division – consisting of Mobile
Communications and Networks – posted operating profits of 5.47 trillion
won on 33.89 trillion won in revenue for the December quarter. Out of
the total IM earnings, the mobile business was responsible for 32.17
trillion won.
The
earnings of the Mobile Communications Business fell slightly compared
to the previous quarter due to seasonally increased marketing
expenditures and a one-off expense. Meanwhile, tablet shipments rose
sharply on strong sales of GALAXY Tab 3 and GALAXY Note 10.1 (2014
Edition), released during the end of the third quarter.
In
2014, Samsung will focus on expanding its smartphone portfolio both by
region and price range, and actively responding to growing LTE demand in
Europe and China. In terms of our product mix, smartphone shipments
will account for over 70 percent of total mobile phone shipments.
For
tablets, the market is expected to increase by more than 20 percent
from the previous year and Samsung aims to continue solid sales momentum
through larger display devices and innovations in user convenience.
Samsung
will secure solid profitability by pursuing innovation in retail
channels such as new Experience Shops, pursuing stronger cost efficiency
and actively cultivating B2B market sales, through its enterprise
security solution KNOX.
Display Business Challenges Under Weak Seasonality
The
Display Panel segment recorded an operating profit of 110 billion won
in the fourth quarter on revenue of 6.46 trillion won. This represented
declines in sales and profit compared with the previous quarter.
Despite
strong seasonality, the overall LCD market was impacted by a decline in
average selling price for TV panels due to weaker demand from
manufacturers making inventory adjustments in an oversupplied market.
Accordingly, Samsung’s TV panel shipments decreased on-quarter in the
low single-digit percentage range, although shipments were higher than
the corresponding quarter of the previous year. Depreciation costs from
LCD fab operations in China affected the panel business’ profit for the
quarter.
For
IT panels, growth momentum continued into the quarter for both the
market and Samsung with increased demand for tablet panels as
manufacturers prepared new products for the year-end peak season. Market
demand for laptop and monitor panels remained weak.
Looking
ahead to 2014, the company expects to secure profitability in TV panels
by increasing sales of premium products, including over 60-inch and
curved panels, as well as expanding its entry-level lineups. The
company also aims to capitalize on the stronger demand for TV panels in
2014 that is expected due to major global sporting events and deeper UHD
market penetration.
For
OLED panels, Samsung will focus on expanding the market into a broader
range of products, including mass-market smartphones, tablets and
wearable devices, in order to achieve sustainable revenue growth.
Furthermore, the company plans to achieve mass production of
higher-quality flexible panels to further widen its technological gap
over competitors.
Solid TV Sales Lift Consumer Electronics
The
Consumer Electronics division – encompassing the Visual Display and
Digital Appliances businesses – posted an operating profit of 660
billion won which was an 88-percent increase on the previous quarter.
Revenue was 14.27 trillion won, an increase of 18 percent
quarter-on-quarter. The Visual Display Business accounted for 10.07
trillion won of sales, led by increased premium TV sales.
Lifted
by peak season sales in the fourth quarter, the TV market experienced
stronger demand with high growth in the over 60-inch TV segment and
increased shipments in developed markets.
Samsung
outperformed the market in the quarter through successful seasonal
promotions, helping it to improve performance both on-quarter and
on-year. With strong quarterly growth in premium product sales, such as
Smart TVs and over 60-inch TVs, the company was also able to improve
margins.
Heading
into 2014 and expected world soccer championship -focused promotions
and UHD TV market expansion, we plan to outperform the market by
increasing sales of high value-added premium TV products, such as UHD,
curved, and large-size over 60-inch TVs. Additionally, the company will
actively respond to diverse regional market conditions with entry-level
LED TVs and region-specific products.
For
home appliances, Samsung posted slight on-quarter growth due to
year-end promotions and increased sales of premium products in the U.S.
and Europe as demand began to pick up in developed markets. Looking
ahead, although sluggish growth in emerging markets is expected, Samsung
will target on-year growth in 2014 thanks to economic recovery in
advanced markets where it will focus on launching innovative products
including its premium Chef Collection lineup. To improve profitability,
region-specific models will be expanded and the company will pursue
greater efficiency in operations.
About Samsung Electronics Co., Ltd.
Samsung
Electronics Co., Ltd. is a global leader in technology, opening new
possibilities for people everywhere. Through relentless innovation and
discovery, we are transforming the worlds of televisions, smartphones,
personal computers, printers, cameras, home appliances, LTE systems,
medical devices, semiconductors and LED solutions. We employ 270,000
people across 79 countries with annual sales of US$187.8 billion. To
discover more, please visit www.samsung.com.
※ Consolidated Sales and Operating Profit by Segment based on K-IFRS (2012~2013)
|
(Unit: KRW trillion)
|
2012
|
2013
| ||||||||||
|
1Q
|
2Q
|
3Q
|
4Q
|
FY
|
1Q
|
2Q
|
3Q
|
4Q
|
FY
| |||
|
Sales
|
CE
|
11.50
|
12.83
|
12.22
|
14.56
|
51.11
|
11.24
|
12.78
|
12.05
|
14.27
|
50.33
| |
|
IM
|
22.47
|
23.36
|
29.30
|
30.71
|
105.84
|
32.82
|
35.54
|
36.57
|
33.89
|
138.82
| ||
| |
Semicon
|
7.98
|
8.60
|
8.72
|
9.59
|
34.89
|
8.58
|
8.68
|
9.74
|
10.44
|
37.44
| |
|
DP
|
8.54
|
8.25
|
8.46
|
7.75
|
33.00
|
7.11
|
8.18
|
8.09
|
6.46
|
29.84
| ||
|
DS
|
16.33
|
17.03
|
17.40
|
17.52
|
68.29
|
15.81
|
17.05
|
17.90
|
17.00
|
67.76
| ||
|
Total
|
45.27
|
47.60
|
52.18
|
56.06
|
201.10
|
52.87
|
57.46
|
59.08
|
59.28
|
228.69
| ||
|
Operating
Profit |
CE
|
0.50
|
0.73
|
0.40
|
0.70
|
2.32
|
0.23
|
0.43
|
0.35
|
0.66
|
1.67
| |
|
IM
|
4.18
|
4.13
|
5.63
|
5.47
|
19.42
|
6.51
|
6.28
|
6.70
|
5.47
|
24.96
| ||
| |
Semicon
|
0.70
|
1.03
|
1.02
|
1.42
|
4.17
|
1.07
|
1.76
|
2.06
|
1.99
|
6.89
| |
|
DP
|
0.23
|
0.71
|
1.17
|
1.11
|
3.21
|
0.77
|
1.12
|
0.98
|
0.11
|
2.98
| ||
|
DS
|
0.95
|
1.69
|
2.22
|
2.56
|
7.42
|
1.85
|
2.92
|
3.09
|
2.14
|
10.00
| ||
|
Total
|
5.69
|
6.46
|
8.06
|
8.84
|
29.05
|
8.78
|
9.53
|
10.16
|
8.31
|
36.79
| ||
Note 1: Sales for each business include intersegment sales
Note 2: CE (Consumer Electronics), IM (IT & Mobile Communications), DS (Device Solutions), DP (Display Panel)
Note 3: Information on annual earnings is stated according to the business divisions as of 2013.
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