Bloomberg Electronics Co. reported its first profit decline since 2019, underscoring the depth of a global PC and memory chip downturn.
South Korea's largest company said on Friday that operating profit fell by 32% to 10.8 trillion won $7.7 billion for the three months ended September. Analysts had estimated 12.1 trillion won on average. Sales missed estimates, coming in at 76 trillion won. Samsung will provide net income and details of divisional performance with its full report at the end of the month.
In recent weeks, global memory chipmakers warned that they are facing a tougher market as inventories build up and orders are being cut by data center as well as consumer tech clients as demand for PCs and phones weakened further than expected. Micron Technology Inc. and Kioxia Holdings Corp. are cutting output to try and balance supply in order to prevent a price crash.
US processor and graphics chip maker Advanced Micro Devices Inc. missed its third quarter sales figures, which came in $1 billion shy of its own forecast, just before Samsung's results. AMD Chief Executive Officer Lisa Su said that Macroeconomic conditions caused lower than expected PC demand and a significant inventory correction.
After the news, the shares of Samsung fell by as much as 2% in Seoul.
Heo Pil-Seok, chief executive officer at Midas International Asset Management in Seoul said that this downcycle is not simply driven by typical supply and demand dynamics, but it is different from the past cycles due to geopolitical risks. A large chunk of demand for chips will be weakened because of the US government's export controls on IT companies in China. Memory makers earnings will deteriorate further if AMD, Nvidia can't sell their chips in China. According to Statistics Korea, South Korea, home to the world's two largest memory chipmakers, reported a decline in chip output in August for the first time in more than four years. Samsung's compatriot SK Hynix Inc. said a major adjustment to its capital expenditure next year was unavoidable during its last earnings call. The sudden memory market crash comes after a series of macroeconomic shocks ranging from Russia's invasion of Ukraine to soaring inflation and gas prices along with US Fed rate hikes. Memory buyers like PC manufacturers have reduced orders, and are using their existing stockpiles, as a result of the deterioratid consumer sentiment.
While electronics demand has crumbled this year, Morgan Stanley upgraded the semiconductor sector at the beginning of the week, which pushed Samsung and Hynix share prices up on the expectation of a market rebound in the latter half of 2023.
The memory market is unlikely to recover over the next year, according to Kyung Kyehyun, the head of Samsung's chip business, Kyung Kyehyun. The Korea Economic Daily reported on Friday that Samsung cut its guidance for chip sales by 32% in the second half of the year compared to its forecast in April.
According to Song Myung-sup, an analyst at HI Investment Securities, said that DRAM and NAND prices fell by 15% in the third quarter due to the extremely sluggish demand. Clients are slapping chip orders despite sharp price cuts, despite the fact that some big tech companies are the only ones that have slashed their chip orders. Until the Shareholders Get Paid, none Musk Won t own Twitter Until the Shareholders Get Paid