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

Author | Sun Pengyue

Editor | Gale

Samsung's earnings have plummeted again.

Recently, Samsung Electronics disclosed financial data showing that operating profit in the third quarter of this year was 2.4336 trillion won (13.225 billion yuan), down 77.57% from a year earlier, while sales were 67.4047 trillion won, down 12.21% from a year earlier.

Surprisingly, Samsung's biggest loss-making business is its proud semiconductor division.

Samsung Q3 2023 results according to KBS, Samsung Electronics' semiconductor division lost 3.75 trillion won in the third quarter of this year, plus a cumulative loss of 8.94 trillion won in the previous two quarters. In less than a year, Samsung lost 12.69 trillion won (68.8 billion yuan) on its semiconductor project.

Just five years after Samsung, which became the world's number one semiconductor company in 2017, peaked at more than 45% of the global memory market, the semiconductor kingdom began to crumble.

1. The main source of income of Samsung semiconductor business in the abrupt semiconductor market is the memory chip, that is, the storage business.

Many people don't know that before Samsung made mobile phones, its core business was to make memory chips. As early as 30 years ago, Samsung developed the world's first 64Mb DRAM (memory stick), which made Samsung Electronics the world's largest DRAM manufacturer in 1992 and the largest memory chip manufacturer the following year.

In 1999, Samsung developed the first 1GB NAND flash memory, and then in 2002, Samsung became the first company in the world to mass-produce 1GB NAND flash memory. Since then, Samsung has overtaken Toshiba to become the leader in the flash memory market.

DRAM and NAND business have become the core pillars of Samsung Semiconductor. Even after Samsung phones gradually disappear in the Chinese market, Samsung will still be able to stay at the top of the global Internet company with the benefits of its storage business.

But with the advent of the epidemic era, chip buyers in the global market have suspended orders to speed up the consumption of existing inventory, and chip prices have fallen by about 13% to 18% this quarter.

Due to the adjustment of both supply and demand, not only the price of memory chips plummeted, but even could not be sold at one time, resulting in a very serious backlog of inventory. According to data, Samsung semiconductor inventory has exceeded 180 billion yuan by the end of June 2023.

To reduce inventory, Samsung was forced to start cutting supplies in an attempt to bring the storage market back to balance. In July, Samsung publicly announced that it would cut its monthly production of DRAM memory to 620000 wafers, down 12% from a year earlier, the lowest since the third quarter of 2021.

In addition to the old chips can not be sold, the memory chip market is also undergoing earth-shaking changes.

With the advent of the AI era, generative large models have exploded. In order to match the extremely high computing requirements of AI servers, DRAM and NAND memory chips have been eliminated one after another, while the new memory chip HBM (High Bandwidth Memory, high-bandwidth memory) has become the mainstream.

According to public data, HBM chips are stacked with GPU chips to achieve a large-capacity, high-bit-width DDR composite array, which can keep larger models and more parameters closer to the core computing, thus reducing the latency brought by memory and storage solutions.

HBM chips are now standard for AI models, while Samsung's old rival SK Hynix has more than 50 per cent of the market. And cooperate with Nvidia to develop AI chips such as H100 and H200 chips, occupying an exclusive 90% high-end market share.

Samsung, which lags behind step by step, obviously, as the largest company of memory chips, cannot eat the dividends of the AI era at all, and even leaves a pile of old-fashioned memory chips that cannot be sold.

2. the face-saving mobile phone business, in addition to the lossmaking semiconductor business, still has some bright spots in this financial report. In particular, Samsung's net profit reached 5.5 trillion won, far exceeding the previous forecast of 2.52 trillion won. The year-on-year decline fell to 40% from 86% in the second quarter, and profits improved.

It is Samsung's best-known mobile phone business that has contributed to Samsung's net profit.

According to Samsung Electronics, the better-than-expected performance was mainly due to increased sales of new smartphones and high-end display products.

According to data released by IDC, 1.21 billion smartphones were shipped worldwide in 2022, the lowest point since 2013. Among them, Samsung continues to hold the first place in the market share with 260.9 million units shipped and 21.6% market share.

In the cold wave of mobile phones in which all brands are in recession, Samsung can be called the "top dwarf".

Unfortunately, starting from December 12, 2021, Samsung officially named the division where IT mobile communications and consumer electronics business merged as DX (device experience), and no longer announced the specific sales of the mobile phone business separately.

Samsung Galaxy phones in order to make up for the semiconductor business losses, Samsung is also painstaking efforts in the mobile phone business, and even publicly set a target of 3500 million Galaxy S24 shipments, plans to ship a total of 253 million smartphones in 2024.

In order to achieve this goal, Samsung has focused on the ever-hot AI model, constantly creating the concept of "AI model phone", and even made a bold statement in the western market: Samsung Galaxy S24 will be the first "AI model phone".

However, the Galaxy S24 has not yet been seen, Huawei Mate 60 series has been equipped with self-research plate ancient model, becoming Samsung's first "AI model phone".

Seeing that the AI model phone doesn't work, Samsung plans to start redeveloping the Exynos (Orion) SoC, working with AMD and Google to create a self-developed chip that can rival or even surpass Apple's A-series.

On October 6 this year, Samsung held a press conference and officially unveiled Samsung's next-generation mobile flagship SoC Exynos 2400. It is understood that Exynos 2400 has adopted a four-cluster architecture design on CPU and joined hands with AMD to equip Exynos 2400 with Xclipse 940GPU based on the latest AMD RDNA 3 architecture.

It is reported that the Samsung Galaxy S24 series will be launched in the third or fourth week of January 2024.

Although it can no longer be the first AI model phone, Samsung still regards the AI as an important feature of the Galaxy S24.

Samsung announced a new AI tool to be designed for Galaxy S24, which natively implements AI from text to image through Exynos 2400. It also includes smart experiences such as photos, messages, and voice recognition.

Although the plan is good, Samsung Orion processors have a bad reputation. The negative news of high power consumption and high heat has been frequently exposed, and production has been stopped for many times.

Under the double siege of Apple A17 Pro and Qualcomm Snapdragon 8 Gen3, the future of Exynos 2400 may not be optimistic.

3. Samsung has also begun to build big models in addition to AI big model phones, Samsung has also followed the footsteps of many mobile phone brands and started self-research and generation of AI.

On today's Samsung artificial Intelligence Forum 2023, Samsung officially announced its self-developed generative AI product Gauss (Gauss).

According to CTOnews.com, the large model, made up of Samsung Gauss Language, Samsung Gauss Code and Samsung Gauss Image, is named after the legendary mathematician John Carl Friedrich Gauss, who founded the normal distribution theory that underpins machine learning and artificial intelligence.

Samsung Gauss model it is introduced that the three components of Gauss have their own uses, among them, Samsung Gauss Language is a generative language model, which can use AI to write e-mail, summarize documents and translate content; Samsung Gauss Code provides AI code function, you can write code and test case generation; Samsung Gauss Image is a generation image model, you can generate and edit creative images.

Overall, Samsung Gauss is essentially a "typical AI model" to improve productivity, involving the three most popular functions of word processing, writing code, and generating images. Samsung said that Gauss will expand to various Samsung official App in the near future.

As a former leader in the storage field, Samsung suffered a lot of setbacks in the AI era, with a large backlog of DRAM and NAND memory chips, and high value-added products such as HBM (high bandwidth memory), which are closely related to AI, were surpassed by old rivals, and the transformation was difficult.

Samsung, which walks on two legs, can only bet on its mobile phone business after a broken leg. Although it has failed in China's mobile phone market, Samsung, which has always been strong in Europe and South America, still has a chance to make a comeback.

This article comes from the official account of Wechat: zinc Finance (ID:xincaijing), author: sun Pengyue

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