Yahoo Finance Samsung Looks Past $3.4 Billion Chip Loss To Late 2023 Recovery
(Bloomberg) -- Samsung Electronics Co. posted a record $3.4 billion loss at its pivotal memory chip division, but said it expects the global tech industry to begin emerging from its downturn later this year.
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It joined SK Hynix Inc. in predicting some relief from a broad tech recession that’s hit the world’s biggest names from Apple Inc. to Intel Corp. Asia’s largest electronics company said Thursday it expects demand to only gradually improve in a range of markets from smartphones to PCs and storage, driven by a Chinese economic recovery and accelerating AI development.
Samsung has been at the heart of a slump gripping the $160 billion global memory industry, a proxy for a wider downturn that set in after a Covid-era boom in internet activity and device sales. Inflation and recession fears last year triggered a rapid pullback on consumer and business spending that’s since hammered sales of electronics worldwide.
The company, which supplies chips to Apple while making the iPhone’s closest competitor, reported net income of 1.4 trillion won ($1.05 billion), lagging the 1.45 trillion won average analyst estimate. Its semiconductor division, typically its largest, posted an unprecedented loss of 4.58 trillion won. Its shares were largely unchanged in Seoul trading.
“The memory chip industry has likely passed the worst of weak demand” in the first quarter, Eli Lee, head of investment strategy at Bank of Singapore. “Higher-end memory sales will continue to support pockets of demand, especially in 2H23 due to new smartphone launches and AI demand expansion.”
Samsung plans to maintain 2023 investment in memory chips at about last year’s level, because it’s seeking to safeguard its longer-term competitiveness. That’s despite promising a “meaningful” cut in semiconductor production, a reduction aimed at stabilizing collapsing chip prices. The Korean company has historically aimed to spend throughout recessions to protect its lead.
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The unusual move, twinned with more upbeat predictions about PC and phone demand, had spurred hopes that the industry will climb out of its trough this year. Spot memory prices rebounded for the first time in 13 months shortly after Samsung’s announcement.
On Wednesday, Hynix added to that sentiment after reporting a drop in revenue that was not as bad as feared and saying it sees memory prices bottoming out in the current quarter. Micron Technology Inc., the largest US maker of memory chips, had already said client inventories were declining.
Samsung posted its slimmest operating profit since 2009 just a few weeks ago. Any sustained recovery may now hinge on an economic rebound in China, the world’s largest market for PCs and smartphones. That recovery has been uneven but is gaining steam.
“In the second half, the smartphone market is expected to increase in both volume and value amid signs of a global economic recovery,” it said in its statement.
Samsung managed to stay in the black during the March quarter in part because its new Galaxy S23 phone series bucked the overall smartphone slump. The mobile division posted a 3.9 trillion won operating profit in the quarter.
Longer term, investors remain transfixed on how a US-China conflict might affect the industry. Beijing launched a review of chips from Micron in March, inciting concerns about a backlash toward American companies and possibly US allies. China is among Korea’s largest export destinations, and a key market as well as a production base for Samsung and Hynix.
South Korean President Yoon Suk Yeol is touring the US capital this week and discussions are likely to center on Korea’s role in US curbs on exports to China, part of Washington’s effort to contain its political rival. A blockade on shipments of chipmaking equipment threatens to curtail Samsung’s memory operations in China.
Executives said Thursday they’re negotiating with Washington about guardrails in the CHIPs and Science Act, which constrain companies that take federal funds from certain expansions in China.
“The US will collect opinions and feedback from the industry and also carry out negotiations with individual companies,” said Ben Suh, head of investor relations. We “are studying various possibilities and scenarios and will continue to work on minimizing the geopolitical risks to our business.”
--With assistance from Vlad Savov, Min Jeong Lee, Debby Wu, Gao Yuan and Youkyung Lee.
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