Samsung forecasts rebound in H2 following record chip loss in Q1

An employee demonstrates a Samsung Electronics' flagship smartphone Galaxy S23 Ultra at an unveiling ceremony in Seoul, South Korea, January 30, 2023. REUTERS/Kim Hong-Ji

After its semiconductor division reported a record loss on Thursday due to weak demand for tech devices, Samsung Electronics Co Ltd forecasted a gradual chip recovery in the second half of 2018.

Chip prices plummeted in the first quarter due to a global decline in semiconductor purchases due to an economic recession and sluggish consumer spending. This precipitated production cuts across the sector.

In the second half, Samsung said its semiconductor business would concentrate on high-capacity server and mobile products "in anticipation of a gradual market recovery and a rebound in global demand."

Samsung stated that it anticipates a limited recovery for memory processors in the current quarter as major data center firms invest more conservatively in servers.

For the January-March quarter, the world's largest memory chipmaker reported an operating profit of 640 billion won ($478,6 million), down 95% from 14.12 trillion won a year earlier and the lowest profit for any quarter in 14 years. 18% decline in revenue to 63.7 trillion won.

The chip division of the South Korean tech titan, normally its most reliable cash cow, reported a loss of 4.58 trillion compared to a profit of 8.45 trillion a year earlier.

Due to soaring inflation, consumers around the globe have reduced their spending. As a result, smartphone, personal computer, and server manufacturers have depleted inventories, resulting in a 70 percent drop in semiconductor prices over the previous nine months.

This month, Samsung announced a rare chip production reduction, joining smaller competitors.

Without a fundamental recovery in demand for devices that use processors, analysts believe Samsung's profit in the current quarter may be comparable to that of the first quarter.

Buy Chips Again

By the second half of the year, customers will have depleted their inventories and will progressively resume purchasing chips, according to Samsung.

Despite the record loss in semiconductors, Samsung reported its Q1 capital expenditures were 10,7 trillion won, the highest of any first quarter.

Samsung spent 9.8 trillion won on chips as it set up production in its facilities in Taylor, Texas, and Pyeongtaek, South Korea.

"Samsung Electronics will continue to invest in memory semiconductors at a similar level as last year... to ensure its competitiveness in the mid-to-long-term," the company said.

In Q1, Samsung's mobile business reported a profit of 3.94 trillion won, up from 3.82 trillion a year earlier.

"Samsung is focusing on profits rather than shipments" as it satisfies a more resilient demand for premium smartphones, according to Counterpoint senior analyst Jene Park.

As the global economy recovers, Samsung expects the smartphone market's shipments and revenues to increase in the second half.

In accordance with the market, Samsung's stock fell 0.5% in morning trading.

Investors anticipate a memory chip recovery in the second half of this year, resulting in a 16% year-to-date increase in Samsung's stock.

Publish : 2023-04-27 07:42:00

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