Samsung Electronics posts first chip loss in 14 years on weak demand

[Photo by Yonhap]

Samsung Electronics Co., the world’s largest memory chipmaker, posted a quarterly loss in its semiconductor division for the first time in 14 years as global demand weakened and prices dropped.

The company’s DS division, which oversees semiconductors, posted an operating loss of 4.58 trillion won ($3.42 billion) in the first quarter, compared with a profit of 8.45 trillion won a year ago, according to a statement from Samsung Electronics Thursday. The company has seen losses in the semiconductor business for the first time in 14 years since the first quarter of 2009 following the global financial crisis.

Overall, Samsung Electronics posted an operating profit of 640.2 billion won in the first quarter, 96 percent lower than a year earlier, according to a regulatory filing. That’s better than the 585.7 billion won estimate by Yonhap Infomax. This is the first time since the first quarter of 2009 that the company saw its quarterly operating profit fall below 1 trillion won.

Sales revenues fell 18.1 percent year-on-year, to 63.75 trillion won, and net profits plummeted 86.1 percent to 1.57 trillion won. These figures were mostly in line with the preliminary figures disclosed on April 7, which estimated 63 trillion won in revenue and 600 billion won in operating profits.

Shares of Samsung Electronics fell 0.3 percent to 63,900 won as of 10:35 a.m. in Seoul trading. That compares with a 0.3 percent decline in the benchmark Kospi index.

The weak earnings performance is due to ongoing weak semiconductor industry, the key business for the company, following sluggish demand, an increase in inventories and price falls driven by a global recession.

Memory chips saw significant poor performance due to a sharp drop in prices as customers continued to adjust their inventories amid inventory valuation losses.

Samsung Electronics Co. DRAM [Photo provided by Samsung Electronics]

As for DRAM, demand was sluggish due to high inventories in customer warehouses. However, NAND flash memories exceeded market forecasts with a bit of growth thanks to an aggressive response to demand for high-capacity products, despite overall weak demand.

System large-scale integrations (LSI) saw a decline in performance following a drop in demand for key products driven by weak demand from mobile phones and TVs.

The foundry business also saw a decline in demand as the global economic downturn weakened demand and new orders were reduced due to increase in customer inventories.

SK Hynix Inc., the world’s second-biggest memory chipmaker, Wednesday reported a record quarterly loss of 3.4 trillion won due to sluggish semiconductor demand.

Meanwhile, the Device Experience (DX) division posted 4.21 trillion won in operating profits in the first quarter, down 0.4 percent from a year ago. Sales dropped 4 percent to 46.22 trillion won. The Mobile Experience (MX) business that covers smartphones, offset some losses from chips with robust performance thanks to sales of its new Galaxy S23 smartphone. Profit margins recovered to double digits.

Despite the unfavorable environment, Samsung Electronics still increased its investment for the future. The company invested 10.7 trillion won in facilities in the first quarter, the largest first-quarter investment. That’s 36 percent more than a year ago. About 9.8 trillion won was invested into semiconductors and 300 billion won into displays. Research and development spending was 6.58 trillion, the highest for the quarter.