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Samsung upbeat about AI-driven smartphones after losing sales crown to Apple

By Michelle Toh, CNN

Hong Kong (CNN) — Samsung posted its fourth straight quarter of slumping profits on Wednesday, capping off a dismal year that also saw it lose its crown as the world’s top smartphone maker.

The South Korean tech giant posted a 35% drop in profit on Wednesday, in a sign of how demand for consumer devices and the chips that power them continue to remain sluggish.

The company said its operating profits declined to 2.8 trillion won (almost $2.1 billion) in the December quarter, compared with 4.3 trillion won ($3.5 billion) a year earlier, and roughly in line with its earnings forecast shared earlier this month.

Despite that, Samsung is optimistic about a resurgence in demand for mobile devices this year.

The company told investors that it anticipates the smartphone market to rebound in 2024, particularly with the rollout of new products, such as AI-powered smartphones, set “to drive an improvement in demand.”

Samsung, which has also long been the world’s leading seller of smartphones, was overtaken by Apple (AAPL) in the fourth quarter, typically a peak time for retailers because of the year-end holiday shopping season.

According to market research firm IDC, the iPhone maker held 20.1% of global market share in 2023, just above Samsung’s 19.4%.

The South Korean firm has acknowledged “lower smartphone sales” during the fourth quarter, though it noted a pickup in demand for high-end smartphones compared to the previous three months. Tablet sales also jumped as customers were enticed by new product launches, it said.

Samsung is combating headwinds on numerous fronts. After a historic supply shortage during Covid, demand for semiconductors has fallen over the past year as consumer demand for electronics remains weak over global economic uncertainty. That’s driven huge losses for Samsung, the world’s biggest memory chip maker.

On Wednesday, the firm posted a loss of 14.9 trillion won (roughly $11.2 billion) for its device solutions unit, which includes the memory chip business, for 2023, compared to a profit of 23.8 trillion won ($17.8 billion) the previous year.

This year, however, the market is expected to recover gradually, “despite various potential obstacles, including interest rate policies and geopolitical issues,” Samsung said in a statement Wednesday.

The company managed to command higher prices for memory chips in the fourth quarter compared to the previous quarter, showing a slight “improved performance,” it added.

Samsung warned that it would continue to face challenges, however. “As ongoing macroeconomic uncertainties are expected to weigh on the business environment in the near-term, the company expects earnings in the first half of 2024 to show a moderate improvement, with a more significant improvement expected to take place in the second half of the year,” it said.

Samsung shares dipped 1.6% in Seoul on Wednesday.

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