Samsung Group’s Market Capitalization Drops 23% Amid Weak Performance Of Key Affiliate

Samsung Group’s market capitalisation saw a significant decline in 2024, dropping approximately 23% due to the weak performance of its flagship affiliate, Samsung Electronics. Data released on Sunday showed that the combined market value of Samsung’s affiliates stood at 548.4 trillion won ($371.5 billion) as of Thursday. This marks a sharp decrease from 709.6 trillion won ($481.8 billion) a year earlier, based on figures compiled by Yonhap Infomax, the financial news arm of Yonhap News Agency.

Samsung Group, which includes 22 affiliates listed on the local stock market, has faced considerable challenges this year. Among the major contributors to the drop in market capitalisation are Samsung Electronics, Samsung SDI Co., and Hotel Shilla Co. Shares of Samsung Electronics have fallen 31.71% in 2024, while Samsung SDI and Hotel Shilla saw even steeper declines, with their stock prices dropping 47.66% and 42.58%, respectively.

This sharp downturn highlights the struggles faced by the conglomerate in a year marked by sluggish market conditions. Despite its strong brand and diversified business portfolio, Samsung has been unable to escape the pressures affecting global markets, particularly in its core sectors.

Slump in Memory Chip Market Contributing To Decline

Analysts attribute much of Samsung Electronics’ struggles to a downcycle in the memory chip market, which has weighed heavily on the company’s performance. According to Kim Dong-won, a researcher at KB Securities, shares of Samsung Electronics are likely to trade within a limited range for the near future, as the memory chip sector remains in a downturn.

In addition to the memory chip slump, the broader market is also facing challenges. The weakening demand for traditional IT products, including smartphones and PCs, has contributed to persistent low profitability in Samsung’s memory business, one of its core operations.

Analysts have revised downward their earnings forecasts for Samsung Electronics’ fourth-quarter performance. A recent survey by Yonhap Infomax, which polled 20 Korean brokerage firms, estimates the company’s operating profit for the October-December period at 8.58 trillion won ($5.92 billion). Although this marks a notable improvement from the 2.82 trillion won ($1.91 billion) reported during the same period last year, it still represents a significant reduction from earlier estimates. In October and November, analysts had projected the company’s operating profit to reach 9.77 trillion won ($6.7 billion).

Market observers suggest that the ongoing decline in demand for traditional tech products has compounded Samsung Electronics’ struggles, particularly as the memory chip segment remains weak.

US Government’s Support For Samsung Semiconductor Investments

Despite the challenges, Samsung Electronics has received support for its long-term growth initiatives. The US Commerce Department recently awarded the company up to $4.745 billion in direct funding to support its chipmaking investments in central Texas. This funding is part of a broader strategy by the US government to strengthen domestic semiconductor production, a critical sector for both national security and economic growth.

Samsung’s efforts to bolster its semiconductor production capabilities in the United States may provide some relief in the longer term, as it aims to mitigate the impact of the current downturn in the global memory chip market.

While Samsung Group’s current financial outlook remains clouded by weak market conditions, the company continues to invest in strategic areas such as semiconductor manufacturing. However, experts warn that recovery will depend largely on a rebound in the memory chip market and a stabilization in demand for IT products. For now, Samsung’s market value and performance continue to reflect the broader challenges facing the tech industry globally.