US stocks retreated on Tuesday as the previous day's tech rally lost steam following a profit warning from Samsung. The Dow Jones Industrial Average slipped over 200 points, while the S&P 500 and Nasdaq Composite both shed around 0.4%. Samsung's announcement of a 35% drop in fourth-quarter operating income dampened investor sentiment in the tech sector. The market opened in the red as tech stocks gave up ground. Investors are now closely watching the upcoming December consumer inflation reading and monitoring statements from Federal Reserve officials regarding the possibility of a rate cut. Oil prices rose over 1% due to tensions in the Middle East and Saudi Arabia's decision to cut output, with crude futures rebounding on signs of Russia adhering to export cuts and ongoing protests in Libya limiting production. Stocks trending in morning trading included Juniper Networks, Alaska Airlines, Activision Blizzard, and Nvidia.
Samsung Electronics reported a 34% decline in operating profit for the last quarter, with operating profit measured at 2.8 trillion South Korean won ($2.1 billion) compared to 4.3 trillion won ($3.2 billion) from the same period last year. Its operating profit for the full year 2023 was at 6.5 trillion won ($4.8 billion), marking an 85% decline from 2022. Samsung lost 2.3% of the smartphone market share and handed over the crown to Apple. It also suffered year-on-year operating losses for the first time in three decades. The decline is attributed to the slowdown in the semiconductor memory sector, which experienced one of the worst declines in history. Samsung's Device Solutions division, responsible for manufacturing semiconductors, was heavily affected by the global collapse in sales. However, experts predict that Samsung's results will improve in 2024 due to the recovery in chip prices and the boom in demand for high-bandwidth memory semiconductors.
Apple's market share in Korea exceeded 25% for the first time in 2023, reaching 25% and narrowing the gap with Samsung. Samsung maintained the No. 1 position in the Korean smartphone market with a market share of 73%, but it decreased by more than 2 percentage points compared to the previous year. Apple's market share in Korea has been steadily increasing by 1 percentage point each year from 2020 to 2022, but saw a threefold increase last year, thanks to the growing popularity among young smartphone users. The launch of the iPhone 15 series in October 2023 saw significant preorders from people in their 20s and 30s. Domestic smartphone sales in Korea last year were estimated at 14 million units, down 8% from the previous year.
According to a report, Apple earned a whopping $1.65 trillion from iPhone sales in the past decade. The iPhone became the most-used smartphone globally in 2023. Apple's total iPhone shipments in the past decade reached 2.3 billion, compared to Samsung's 800 million more smartphones. iPhone sales accounted for 58% of Apple's total revenue in Q1 FY 2024. iPhone annual sales revenue doubled in the past 10 years, from $101.9 billion in FY 2014 to $166.2 billion in FY 2018. After a drop in FY 2019 and FY 2020 due to the pandemic, iPhone sales jumped by almost 40% year-over-year and hit $191.9 billion in FY 2021.
Samsung Austin Semiconductor, a subsidiary of Samsung Electronics, released its 2023 Economic Impact Report, revealing that it generated $26.8 billion in economic contribution and impact through its operations in Central Texas. The report shows that Samsung Austin Semiconductor's economic impact on the region nearly doubled from $13.6 billion in 2022 to $26.8 billion in 2023. The company has invested $18 billion in operating two fabs at the Austin, Texas campus since 1996. The report also highlights the creation of 5,322 direct jobs and 12,344 indirect jobs in Austin, along with 18,161 direct and indirect construction jobs in Taylor. Samsung Austin Semiconductor has provided more than $4 million in charitable giving and partnerships, supporting dozens of charities focused on closing the academic achievement gap. The company has also launched its 5-Star Workforce Development plan and made significant contributions to key learning institutions.
Samsung, LG, and SK have suspended their construction projects in the United States due to soaring costs and subsidy uncertainties. Samsung Electronics invested $17 billion for a chip factory in Texas, but is expected to shoulder a bigger financial burden of up to $8 billion due to rising material and labor costs. LG Energy Solution dropped plans to build a battery manufacturing facility in Indiana with General Motors due to sharp increases in construction costs. Korean chipmakers and battery firms are reassessing their investment strategies in the US, as construction costs continue to rise and political risks ahead of the US presidential election loom. TSMC and SK On have also delayed the operation of their plants in Arizona and Kentucky, respectively, due to rising construction costs and a slowdown in the electric vehicle industry. Market analysts are urging the government to mediate and provide guidelines to alleviate uncertainties for local companies.
Korea's major conglomerates, including Samsung, Hyundai Motor, and Hanwha, are increasing their lobbying activities in the U.S. to minimize potential fallout from the upcoming presidential election. The nation's exports to the U.S. surpassed exports to China for the first time in over two decades. Samsung Group's key affiliates, such as Samsung Electronics and Samsung SDI, spent a record high of $6.3 million on lobbying in the U.S. last year. Hyundai Motor Group's affiliate, Kia, spent a record-high $1.1 million on lobbying in the U.S. last year. Hanwha Group increased its budget for U.S. lobbying to $1.58 million last year. Conglomerates are advised to seek a strategy to gain benefits from the growing protectionism from the U.S.
Samsung is facing scrutiny over repair practices and privacy concerns. A leaked contract reveals that Samsung requires independent repair shops to share customer information, including names, addresses, phone numbers, and device details. The contract also mandates the use of official parts, banning third-party or aftermarket components. These requirements have sparked a debate about the right to repair electronic devices. California and Minnesota have right-to-repair laws set to take effect on July 1, which aim to empower consumers by granting equal access to parts and repair information. iFixit, a prominent repair guide and parts vendor, ended its partnership with Samsung due to conflicts with its right-to-repair mission. Independent repair shops may be pressured to comply with Samsung's demands, potentially impacting the availability of affordable and convenient repair services. Consumers may also be unaware that their personal information is being shared with the manufacturer. The situation highlights the importance of privacy and the need for transparency in repair practices.
Global semiconductor companies like Nvidia, Micron, and TSMC are attracting key personnel from domestic semiconductor giants such as Samsung Electronics and SK Hynix. The Korea Semiconductor Industry Association projects a significant increase in the domestic semiconductor workforce, expecting it to reach 304,000 by 2031. However, the current workforce stands at only 177,000, highlighting a looming shortage in the sector. Each year, fewer than 5,000 semiconductor industry personnel graduate from universities or graduate schools in South Korea, which could result in a shortage of 54,000 personnel by 2031. Nvidia has recruited 500 semiconductor talents from Samsung Electronics, causing concern within the industry. The talent drain from South Korea's semiconductor industry can hinder innovation, reduce competitive edge, and affect the market position and profitability of companies like Samsung Electronics and SK Hynix. The Korea Semiconductor Industry Association's projections highlight the urgency of addressing the talent shortage to ensure the sustainability and growth of the industry.
Silicon Valley is increasing staff screening measures due to the threat of Chinese espionage. Companies in the tech hub are stepping up their efforts to detect and prevent potential infiltration by Chinese spies. The move comes as concerns about intellectual property theft and espionage activities by Chinese actors continue to rise. Silicon Valley companies are implementing stricter background checks, security clearances, and monitoring of employees with ties to China. The increased scrutiny is aimed at protecting sensitive information and technologies from being compromised. The threat of Chinese espionage has become a major concern for tech companies, particularly those involved in cutting-edge research and development. The measures being taken by Silicon Valley reflect the growing recognition of the need to safeguard intellectual property and national security.
Samsung is facing an unprecedented three-day strike staged by its largest union, highlighting the potential labor unrest caused by the rise of AI technology. The strike is not directly related to AI taking people's jobs, but it serves as a warning for companies in the tech industry. As AI technology threatens to upend industries and create further labor unrest, companies have a responsibility to work with unions and give workers a seat at the table. The strike at Samsung comes at a crucial time for the company as it lags behind domestic rival SK Hynix in making high-bandwidth memory chips for AI. The union is demanding changes to the bonus system and other improvements. The strike could inspire similar actions across the tech sector in Asia and beyond. Samsung has the opportunity to show global leadership by working with its employees and giving the union a proper seat at the table. [770dd8d7]