Samsung Electronics’ operating profit fell nearly 70% in the fourth quarter to its lowest level in eight years, according to its preliminary figures, underlining how the slowing global economy is crushing demand for semi- conductors and electronic products.
The world’s biggest maker of memory chips, smartphones and TVs said customers were clearing inventory and the drop in demand for its chips and their price drop was bigger than expected.
Consumer interest in its handsets was also sought after. “Smartphone sales and revenue declined due to weak demand resulting from protracted macroeconomic issues,” he said.
The South Korean company said its operating profit fell 69% to 4.3 billion won ($3.4 billion) in the past three months, from 13.87 billion won a year earlier. early. It was the company’s worst profit decline since the third quarter of 2014 and fell short of Refinitiv’s estimate of 5.9 billion won. Sales would likely have fallen 9% to Won70tn, the company said.
Analysts say Samsung has contributed to the current supply with its increased spending on chipmaking as it pursues a strategy of investing in a downturn to gain market share.
The oversupply problems have been exacerbated by US sanctions on chip exports to China and iPhone production delays at Foxconn’s Chinese factory due to a massive Covid-19 outbreak. Apple is the rival of Samsung’s smartphones but also a big customer for its chips and screens.
Analysts expect the memory decline to worsen in the current quarter before a recovery in the second half. “Memory chip inventories are expected to peak in the second quarter, but Dram and Nand chip prices are expected to rebound in the second half,” said Kim Dong-won, analyst at KB Securities.
Memory chipmakers including Micron Technology, Kioxia Holdings and SK Hynix are cutting capital spending to accommodate excess supply as rising interest rates and the cost of living dampen global tech demand , after a two-year boom during the coronavirus pandemic.
Sales of potato chips in South Korea fell nearly 30% in Decemberr from a year earlier – a fifth straight monthly decline and a reversal from when manufacturers ramped up production to record highs to meet surging demand in the pandemic era.
US chipmaker Micron said it does not expect a recovery until the second half of this year and in December announced a 10% cut in its workforce as it expects to remain in the red. This year. SK Hynix announced in October that it would halve its investments this year.
But Samsung does not plan to cut production and begins production in July at its new national chip factory in Pyeongtaek, one of the largest semiconductor production facilities in the world. The company increased its memory production by about 10% in the fourth quarter, according to eBest Investment & Securities.
However, the deepening crisis has sparked speculation that Samsung may have to cut investment after all, with analysts warning its strategy could result in the company’s first quarterly chip losses since the global financial crisis.
“We believe Samsung is likely to shift its investment strategy for 2023 to a more dovish stance and refrain from increasing investment,” Citigroup analyst Peter Lee said in a recent report, noting that Nand flash memory chip prices were approaching or approaching. .the company’s cost of production, which means that manufacturing would no longer be profitable.
“Without production cuts, it is inevitable that its memory division will suffer losses in the second quarter,” Kim Yang-jae, an analyst at Daol Investment & Securities, said in a note.
0 Comments