In Australia, Samsung primarily sell consumer products and the odd pro product, but it’s semiconductors and memory that is causing alarm, with the business facing major hurdles after fourth quarter profits came in 69 per cent down, with Company-wide cuts on the cards.
Samsung’s Semiconductor, business is expected to lose money for the first time in 14 years, with the business now cuddling up to Chinese Companies who are struggling to get components, due to US bans, to maintain production in their factories.
South Korea’s leading business site ChosunBiz claims “It’s inevitable a reduction in investment in the second half” is coming, and this has observers concerned as Samsung is the world’s biggest supplier of memory for consumer products, including millions of Apple products.
The big worry for Samsung is that their NAND business, which turned into a loss in the fourth quarter, and their DS is expected to turn into a loss from the first quarter of this year.
The DS division includes products such as memory, semiconductors business, LCD and OLED panels, as well as the Harman division that includes connected car systems, audio and visual products, enterprise automation solutions, connected services and Harman Kardon and JBL products.
The pressure is now on for Samsung Electronics Chairman Lee Jae-yong, who is fresh out of jail after being pardoned following being convicted on bribery charges.
The Chairman who took office in that role in October 2022, is still adhering to the position of, “There will be no reduction in production or investment,” but analysts say it is inevitable to revise its strategy, such as reducing investment in the second half at the latest.
Although specific performance by business division is not disclosed in the provisional performance reports, securities firms believe the operating profit of the semiconductor division plunged more than 80 per cent from last year to less than 1 trillion won.
In particular, the NAND flash division among memory semiconductors was evaluated to have a deficit of A$116,838,654,00.
This is the opposite situation from the good times when the profits earned by the semiconductor division accounted for more than half of the Company’s overall operating profit, driving performance.
Observers are claiming things could get worse due to the high level of investment Samsung is making into future production plants, including in the US and Vietnam.
Experts predict Samsung’s NAND flash business will continue to be in the red until the first half of 2023, and the DRAM business will continue to lose money.
ChosunBiz finance editors claim the first quarter of 2009 was the last time Samsung Electronics’ semiconductor business recorded a loss.
At that time, the operating profit rate of the semiconductor business deteriorated to -13%, and the prevailing forecast is that it will record a similar level of operating profit in the first half of this year.
An industry insider says, “Memory prices are still falling steeper than previously expected, and as a result, Samsung Electronics’ memory price decline overwhelms the shipment growth rate, which inevitably deteriorates profitability.” According to market researcher TrendForce, DRAM prices in the first quarter of this year are expected to drop by an additional 13-18% compared to the previous quarter.
Samsung Electronics is claiming it will not reduce supply and investment. At a CES 2023 press conference, Vice Chairman Han Jong-hee of Samsung Electronics answered a question about the facility investment reduction plan, saying, “We have not yet officially announced that we will reduce investment, and we are proceeding as planned.”
The “not yet” was taken that cuts could be made in the future.
What analysts claimed after the press briefing, was that investment already in place will continue in the first half and reversed in the second half.
Company-wide cuts are set to impact the entire business worldwide, claims one insider on the sidelines of the press conference.
