Samsung Electronics' business performance is affected, and the deficit problem of semiconductor business is highlighted

According to Yonhap News Agency, Samsung Electronics achieved annual sales of 300 trillion won for the first time last year, but the fourth quarter was overshadowed by "performance shock".

Due to the sharp decline in demand due to the global economic recession, the performance of all business divisions including semiconductors and smartphones and displays fell into a downturn.

Industry insiders pointed out that in the first half of this year, Samsung's semiconductor division may even experience a deficit. Now, whether to consider reducing production and reducing investment is also attracting attention.

Profitability is getting worse

Judging from the 2022 performance announced by Samsung Electronics on the 6th, annual sales increased by 7.9% from the previous year to 301.7 trillion won. This is the first time the company has broken through the 300 trillion won mark since its establishment.

On the contrary, operating profit was 43.3 trillion won, a decrease of 16 percent from 51.6 trillion won in the same period last year.

Although the scale of revenue has increased, profitability has declined due to the economic downturn, sluggish demand, and rising costs due to inflation.

Samsung's semiconductor business played a supporting role amid difficult operating conditions in the first and second quarters of last year. But as the semiconductor industry shrank rapidly, its performance has been lower than expected since the third quarter, and the situation in the fourth quarter was even worse.

Samsung Electronics' consolidated sales in the fourth quarter of 2022 will be 70 trillion won and operating profit will be 4.3 trillion won. Sales fell 8.5% year-over-year, and operating profit plummeted 69%.

At present, Samsung Electronics has not released the transcripts of each business division. However, the securities industry speculates that in the fourth quarter, Samsung Electronics will have a hard time in all business divisions including semiconductors (DS), equipment experience (DX) and display (SDC).

A colder "semiconductor winter"

In particular, the sluggishness of semiconductor memory is considered a decisive factor in the deterioration of its performance.

After the results were released on January 6, the securities company’s forecast for the operating profit of the DS department in the fourth quarter of last year was 970 billion won for Mirae Asset Securities, 600 billion won for NH Investment Securities, and 400 billion won for High Investment Securities. 1 trillion won.

This is a sharp decrease from the 5.1 trillion won in the previous quarter.

In particular, the memory business of NAND flash memory is likely to turn into a deficit in the fourth quarter. There are forecasts that the entire semiconductor industry may post a quarterly deficit in the first or second quarter of this year.

If Samsung Electronics’ semiconductor division runs into a quarterly deficit, it will be the first time in 14 years since the first quarter of 2009 after the global financial crisis.

Due to sluggish demand, customer companies have strengthened inventory adjustments, DRAM and NAND shipments and prices have fallen less than expected, and the operating rate of foundry (consigned semiconductor production) has also declined, so non-memory performance may also deteriorate.

The downturn in the semiconductor market will continue into the first quarter of this year, so the trend of Samsung Electronics' operating profit reduction will continue.

Market research predicts that in the first quarter, the price of DRAM will drop by an average of 15-20% compared with the previous quarter, and the price of NAND flash memory will also drop by 10-15%.

Some organizations predict that global semiconductor sales will be US$596 billion this year, a decrease of 3.6% from last year. WSTS also expects sales of the semiconductor market this year to decrease by 4.1% from last year to $557 billion.

If there is no subtraction, the memory deficit will become increasingly prominent

With the rapid freezing of the memory industry last year, global memory companies have decided to cut production and reduce investment.

However, Samsung Electronics stated that "there is no artificial reduction in memory production" and insisted that it will not reduce investment.

However, with the sharp drop in memory prices and the possibility of a deficit in the memory sector is increasing, the industry is watching whether Samsung Electronics will also participate in the production cut.

Jin Yangjae, a researcher at Doyle Investment & Securities, judged: "Due to the sharp increase in inventory, the decline in memory prices in the first quarter of this year will be wider than expected." "If there is no decision to cut production, the memory sector will inevitably turn into a deficit in the second quarter. "

In a period of shrinking business climate, expansion of investment in aggressive production capacity (CAPA) may impose a burden on performance, so there is a possibility that investment may be reduced.

Do Hyun-woo, a researcher at NH Investment & Securities, predicted: "Samsung Electronics, which has spare investment, is also expected to have a large-scale deficit in the semiconductor field, and will reduce investment in 2023." In the second half of the year with less inventory than the first half."