Samsung signals second-half recovery after record Q1 chip loss

  • January-March operating profit down 95%
  • The recovery in Q2 should be limited
  • Samsung spends the biggest investments of all the first quarters despite the loss
  • Samsung will maintain chip investment similar to 2022

SEOUL, April 27 (Reuters) – Samsung Electronics Co Ltd (005930.KS) reported a gradual recovery in chips in the second half after its semiconductor business reported a record loss on Thursday, due to a glut of chips due to the low demand for chips. technological devices.

A global slowdown in semiconductor purchases amid a slowing economy and tightening corporate belts sent chip prices tumbling in the first quarter, triggering production cuts across the industry.

By the second half of the year, customers will run out of inventory and gradually start buying chips again, Samsung said.

“We expect inventory levels to start falling in the second quarter,” said Jaejune Kim, executive vice president of Samsung’s memory business.

For the current quarter, Samsung said it expects a limited recovery in memory chips as major data center companies invest more cautiously in servers.

The world’s biggest memory chipmaker said its operating profit fell to 640 billion won ($478.6 million) for the January-March quarter, down 95% from the year previous year and its smallest profit for any quarter in 14 years.

The South Korean tech giant’s chip division – normally its most trusted cash cow – posted a loss of 4.58 trillion won compared with a profit of 8.45 trillion won a year earlier.

Shoppers around the world reduced their purchases due to rising inflation. As a result, smartphone, personal computer and server companies have depleted their inventories, causing chip prices to plummet by around 70% over the past nine months.

Samsung announced a rare chip production cut earlier this month, joining smaller rivals such as SK Hynix Inc (000660.KS).

While this may help chip prices recover slightly, analysts said Samsung’s profit in the current quarter could be similar to the first quarter without a fundamental recovery in demand for devices using chips. .

“In addition to the production cuts in the current quarter, Samsung said its production will be flexible in the second half of the year, which means it may engage in more cuts to manage inventory,” Lee Min said. -hee, analyst at BNK Investment & Securities.


Despite the record chip loss, Samsung said it spent 10.7 trillion won on capital expenditures in the first quarter, the highest for the first quarter of any year.

Of that amount, 9.8 trillion won has been spent on chips as Samsung sets up production at its factories in Taylor, Texas and Pyeongtaek, South Korea.

Samsung said it plans to keep investment in memory chips this year at a similar level to 2022 to secure factory space.

Its positive long-term outlook remained unchanged as the proliferation of electric vehicles, artificial intelligence and high-performance computing would fuel chip demand, he said.

Samsung’s mobile business was a bright spot, posting a profit of 3.94 trillion won in the first quarter, up from 3.82 trillion won a year earlier.

“Samsung is focused on earnings rather than shipments” as it caters to more resilient demand for high-end smartphones rather than volume, said Jene Park, senior analyst at Counterpoint.

In the second half of the year, Samsung predicted that the smartphone market would grow both in terms of shipments and revenues.

Samsung shares rose 0.2% after the earnings call, reversing an earlier decline. The stock is up about 16% year-to-date as investors anticipate a recovery in memory chips in the second half.

($1 = 1,337.3800 won)

Reporting by Joyce Lee and Heekyong Yang; Editing by Jacqueline Wong

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