Samsung's fourth-quarter profit plunged by 30%: Dual blow from sluggish memory market and rising labor costs

Recently, Samsung Electronics released its preliminary financial report for the fourth quarter, showing that its operating profit was 6.5 trillion won (approximately 4.46 billion US dollars), a significant year-on-year decline of 30%. This result was far below market expectations and highlighted the company's predicament under the dual pressures of a sluggish memory market and rising labor costs.

The sluggish memory market has had a significant impact on Samsung Electronics' profits. In recent years, with the saturation of the global consumer electronics market and the increasing economic downturn, the sales of electronic devices such as personal computers and smartphones have continued to decline, directly leading to a weakening demand for memory chips. According to Samsung Electronics' statement, due to the decline in demand from server customers, data centers, and mobile phone manufacturers, chip sales have dropped significantly. Particularly in the DRAM and NAND flash memory markets, prices have fallen sharply, and the situation of oversupply has become increasingly severe. Analysts predict that DRAM prices may drop by 8% to 13% in the first quarter of 2025, while NAND memory prices are expected to fall by 10% to 15%. This downward trend in prices not only affects Samsung Electronics' revenue but also exerts significant pressure on its profitability.

The rise in labor costs is also one of the major challenges faced by Samsung Electronics. With the development of the global economy and the improvement of people's living standards, labor costs have generally increased. For a manufacturing giant like Samsung Electronics, labor costs are an important component of its operating costs. Especially in emerging markets such as India, Samsung Electronics' factories are facing challenges such as worker strikes and demands for better wages and benefits. These events not only affect the normal production of the factories but also increase the company's operating costs. In addition, to maintain its competitiveness, Samsung Electronics also needs to make significant investments in research and development, capacity expansion, and other areas, which further increases the pressure on its labor costs.

Under the double pressure, Samsung Electronics' performance has shown a significant decline. Compared with the third quarter, its operating profit in the fourth quarter dropped by 29.19%, and the growth of its sales was far lower than market expectations. Although Samsung Electronics still achieved year-on-year growth in its full-year performance, the performance in the fourth quarter undoubtedly cast a shadow over the company's future development.

What is more serious is that Samsung Electronics' competitors in the memory market, such as SK Hynix, have shown a strong growth momentum. SK Hynix, relying on its dominant position in the high-bandwidth memory market that is crucial for artificial intelligence accelerators, has successfully captured market share. Particularly in the HBM (High Bandwidth Memory) field, SK Hynix has almost exclusively supplied leading artificial intelligence chipmaker NVIDIA, achieving a significant increase in performance. In contrast, Samsung Electronics' progress in the HBM field has been slow, missing the high-bandwidth memory boom, which has further weakened its competitiveness in the memory market.

Facing these challenges, Samsung Electronics needs to take active countermeasures. On the one hand, the company needs to increase its R&D investment in the memory market, improve product quality and technological level to enhance its competitiveness. On the other hand, Samsung Electronics also needs to optimize its production processes and management models, reduce operating costs and improve production efficiency. In addition, through diversified business layouts and expansion into emerging markets, the company can also bring new growth points.

However, the implementation of these measures is no easy task. Against the backdrop of a global economic downturn and a sluggish consumer electronics market, the challenges Samsung Electronics needs to face remain severe. How to balance R&D investment and cost control, how to expand into new business areas while maintaining existing market share, and how to effectively deal with the pressure of rising labor costs are all issues that Samsung Electronics needs to seriously consider and solve.