Shulou(Shulou.com)11/24 Report--

Beijing time on April 6 morning news, According to reports, Due to the low demand for technology products led to losses in the semiconductor sector, Samsung Electronics is about to usher in at least since the global financial crisis since the lowest quarterly profit.

The South Korean chipmaker will disclose preliminary results for the March quarter on Friday. Analysts, on average, expect the company's operating profit to plummet by about 90 per cent to 1.45tn won (currently about Rmb7, 598m). That would be the lowest since 2009. Some analysts expect the company's quarterly profit to be less than 1 trillion won, or even barely profitable.

Although the semiconductor industry is highly cyclical, the industry has set a cycle that is enough to go down in history during the new crown epidemic. During the epidemic, chip companies such as Samsung increased production capacity as consumers bought new computers and mobile phones, driving a surge in demand. However, as sales declined as the impact of the pandemic waned, high inflation, rising interest rates and other global economic issues had a further negative impact on performance.

This has led to a mismatch between supply and demand in the chip industry of up to US $160 billion (currently about RMB 1.1 trillion), high inventory, and a direct impact on DRAM and NAND prices. Samsung, the world's largest maker of new memory chips, could lose about $2.7 billion in its semiconductor division alone.

"The biggest problem right now is that chip inventories are too high," said Lee Seung-woo, an analyst at Eugene Investment & Securities. So companies need to reduce inventories by reducing production. "

The price of DRAM, a memory chip used to process data in computers and mobile phones, fell 20% in the first quarter of this year and is likely to fall further by 10% to 15% in the second quarter, according to calculations by TrendForce, a market research firm. NAND memory chip prices have also fallen 15%, and are likely to fall further by 5% to 10% in the second quarter.

"Memory chip prices fell faster than expected in the first quarter due to weak demand. Baik Gihyun, an analyst at Yuanta Securities, said,"The decline will slow down in the current quarter. Since DRAM and NAND contract prices will soon reach cash production costs, there will not be much room for exploration. "

According to data released by South Korea's Ministry of Trade, the country's chip exports fell 34.5% in March and more than 40% in February. South Korea's total exports to China, its biggest trading partner, fell 33.4 percent.

Samsung rival Sanjay Mehrotra said last week he was optimistic about the market's recovery this year as inventory levels declined and demand recovered. However, the key to the recovery depends on whether the big chipmakers cut production. "The recovery could accelerate if supply is lowered further. 'he said.

Samsung has been reluctant to cut production. While Micron, SK Hynix and Kaixia have all reduced investment spending and production in hopes of stemming further price declines, Samsung, the industry leader, is ramping up spending.

Samsung is currently led by Lee Jae-yong. The company says its strategy has traditionally been to increase spending during downturns in order to strengthen its competitive position. This approach could help it capture more market share and develop new technologies to beat competitors such as Hynix and Micron when they can't afford to invest.

Workers at Samsung's Pyeongtaek plant are busy assembling the company's fourth large-scale chip production line, with plans to add two more by 2030. In addition to memory chips, Samsung is also trying to expand its semiconductor foundry business, which is currently dominated by TSMC. Samsung announced it would spend 300 trillion won ($229 billion) over the next 20 years to build a new mega-chip factory in Yongin.

While competitors and investors have called for Samsung to follow their competitors in reducing production, Samsung appears reluctant. In February, Lee told Samsung executives that they should not be affected by industry challenges and should continue to invest in the future.

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