According to Yonhap News Agency, Samsung Electronics achieved annual sales of 300 trillion won for the first time last year, but the fourth quarter was overshadowed by "performance impact".

Due to the global economic recession, the demand dropped sharply, and the performance of all business units, such as smart phones and displays, led by semiconductors, fell into a downturn.

Industry insiders pointed out that Samsung's semiconductor sector may even have a deficit in the first half of this year. Now, whether to consider reducing production and investment is also of great concern.

Profitability is getting worse

According to the 2022 performance released by Samsung Electronics on the 6th, the annual sales increased by 7.9% over the previous year, reaching 301.7 trillion won. This is the first time that the company has exceeded the 300 trillion won mark since its establishment.

On the contrary, the operating profit was 43.3 trillion won, a decrease of 16% compared with 51.6 trillion won in the same period last year.

Although the scale of revenue has expanded, the profitability has declined due to the economic downturn, sluggish demand, and rising costs caused by inflation.

In the first and second quarters of last year, Samsung's semiconductor business played a supporting role under difficult operating conditions. However, with the rapid contraction of the semiconductor industry, its performance has been lower than expected since the third quarter, and the situation is worse in the fourth quarter.

Samsung Electronics' consolidated sales in the fourth quarter of 2022 were 70 trillion won and operating profit was 4.3 trillion won. The sales volume dropped by 8.5% year on year, and the operating profit dropped by 69%.

At present, Samsung Electronics has not released the transcripts of all business departments. However, the securities industry speculated that Samsung Electronics in the fourth quarter, including semiconductor (DS), had to fight hard in all business units such as device experience (DX) and display (SDC).

The colder "semiconductor winter"

In particular, the sluggish performance of semiconductor memory is considered to be the decisive factor for the deterioration of its performance.

After the performance was released on January 6, the operating profit forecast of DS Department in the fourth quarter of last year proposed by the securities company was: 970 billion won for future asset securities, 600 billion won for NH investment securities, 400 billion won for High investment securities, etc., which failed to reach 1 trillion won.

This is significantly lower than the 5.1 trillion won in the previous quarter.

In particular, the NAND flash memory business of memory is likely to turn into a deficit in the fourth quarter. It is predicted that the entire semiconductor industry may have quarterly deficits in the first or second quarter of this year.

If Samsung's semiconductor sector is in quarterly deficit, it will be in deficit again 14 years after the first quarter of 2009 after the global financial crisis.

Due to sluggish demand, the customer company's inventory adjustment has been strengthened, the drop in DRAM and NAND shipments and prices has been lower than expected, and the operating rate of OEM (semiconductor commissioned production) has also declined, so the non memory performance may also deteriorate.

The semiconductor market downturn will continue until the first quarter of this year, so the decreasing trend of Samsung Electronics' operating profit will continue.

According to the market survey, the DRAM price in the first quarter will drop by 15-20% on average compared with the previous quarter, and the NAND flash memory price will also drop by 10-15%.

Some institutions estimate that the global semiconductor sales this year will be 596 billion US dollars, down 3.6% from last year. WSTS also expects that the semiconductor market sales this year will decrease by 4.1% compared with last year, to 557 billion US dollars.

Without subtraction, the memory deficit will become increasingly prominent

With the rapid freezing of the memory industry last year, global memory enterprises have decided to reduce production and investment.

However, Samsung Electronics said that "there is no artificial reduction in memory production" and insisted that it will not reduce investment.

However, with the sharp decline of memory price, the possibility of deficit in memory sector is also growing. The industry is paying attention to whether Samsung Electronics is also involved in production reduction.

Jin Liangcai, a researcher of Doyle Investment Securities, judged that: "due to the sharp increase of inventory, the decline of memory price in the first quarter of this year will be larger than expected". "If there is no decision to reduce production, the memory sector will inevitably have deficit conversion in the second quarter."

In a period of declining business prosperity, expanding the investment in aggressive production capacity (CAPA) may impose a burden on performance, so it is also possible to reduce investment.

Du Xianyu, a researcher of NH Investment Securities, predicted that: "Relatively speaking, Samsung Electronics, which has invested heavily, is also expected to have a large deficit in the semiconductor field, and will reduce investment in 2023". "The effect of supply reduction caused by investment reduction will be concentrated in the second half of the year when the inventory is reduced compared with the first half of the year."