Samsung to keep up chip investment, undeterred by 8-year-low profit

  • Chip profit lowest since Q1 2009
  • Analysts expect the chip business to report a Q1 loss
  • The company is raising the alarm on how to produce organic chips
  • It says the need to recover from H2

SEOUL, Jan 31 (Reuters) – South Korea’s Samsung Electronics Co Ltd ( 005930.KS ) said on Tuesday it has no plans to cut investment in chips this year, as a weak global economy plunges the industry into its worst recession due to inflation. a decade.

The guidance follows an industry-wide trend to cut spending and, as a result, growing concern that the world’s largest memory maker aims to tap into its deep pockets and high profit margins to gain market share from smaller peers.

“Samsung may see this period as a good opportunity to increase market share, which should help in the long run, at the expense of SK Hynix and Micron,” said analyst Choi Yoo-june at Shinhan Securities.

Greg Roh, head of research at Hyundai Motor Securities, estimates that Samsung Electronics’ market share could reach a high of 40% for DRAM chips and a mid-range of 30% for NAND flash memory chips in the second half of the year, from about 43%. and 32%.

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Instead of reducing investment in response to falling demand and falling prices, Samsung has signaled that it will curb short-term production through line adjustments, machine repairs and a move to improved chipmaking processes. It also said it will increase the amount of investment that goes into research and development.

“Samsung, in a roundabout way, is saying that production will slow down a bit,” said analyst Kim Yang-jae at Daol Investment and Securities. “However, investors were hoping for a strong production cut, or comments about a quick market recovery – so their shares fell.”

Shares of Samsung and SK Hynix Inc (000660.KS) fell 3% and 2.2% respectively on Tuesday.

Samsung said capital spending in 2023 would be similar to 2022, unlike SK Hynix and Micron Technology Inc ( MU.O ) which said they would reduce investment. In the wake of the deal, major rival Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) has also announced spending cuts.

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The global technology industry has been battling a sharp and sudden drop in demand since late last year, as companies cut spending on tech products and services while consumers spend less on personal goods in the face of rising inflation.


Earlier on Tuesday, Samsung reported its lowest quarterly profit since 2014 and said continued macroeconomic uncertainty will make the first half of this year difficult, although it expects demand to start recovering in the second half.

Weak demand and inventory adjustments will continue to impact the chip business in the first quarter, while smartphone demand is likely to decline year-over-year due to the economic downturn in major regions, Samsung said.

At 4.3 trillion won ($3.49 billion), the October-December operating profit was Samsung’s lowest quarterly profit in eight years. Revenue fell 8% to 70.5 trillion won.

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As memory chip prices drop by double-digit percentages in 2022, Samsung’s chip profits fell – to about 270 billion won in the fourth quarter from 8.83 trillion won a year ago, marking the lowest since the first quarter of 2009.

Some analysts expect the chip business to post a loss in the first quarter, dragging net profit below that of the fourth.

Last week, chipmaker Intel Corp ( INTC.O ) said it expects to lose money in the current quarter as the personal computer industry experiences a chip glut.

In mobile, Samsung said fourth-quarter profit fell to 1.7 trillion won from 2.66 trillion won a year earlier, as the decline in sales of low-end and mid-range smartphones was bigger than expected.

Samsung plans to unveil its latest Galaxy S smartphones later this week.

($1 = 1,232.6000 won)

Reporting by Joyce Lee and Heekyong Yang; Additional reporting by Jihoon Lee; Edited by Christopher Cushing

Our Standards: The Thomson Reuters Trust Principles.


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