Trade statistics for industrialized countries in Asia show that demand for electronics fell in the first half of the year and prices followed suit. Computer chip exports from South Korea fell 35.7 percent in May. The most advanced computer chips fell by 53.1 percent. There is hope to see the bottom.
The worst six months since the financial crisis
A short week after the end of the second quarter, Samsung Electronics, South Korea’s largest company, is preparing with preliminary results. Samsung has pulled back from its worst six months since the fallout from the 2009 financial crisis.
Turnover fell as much as 22 percent to 63,750 billion won (525 billion kroner) — worse than analyst estimates, which were a 20 percent drop from the same quarter last year.
Operating result decreased by as much as 96 percent – to 600 billion won (4.9 billion kronor). This was slightly better than the consensus of 531 billion won (NOK 5.3 billion). There was a similar development in the first quarter, with a 96 percent decline in profits.
The computer chip industry in isolation caused a loss. What size will be known when the official result is submitted later in July.
– We believe the worst quarterly loss from the semiconductor business was in the first quarter, says analyst Jeonie Lee at US investment bank Goldman Sachs in a new report, according to Bloomberg.
We look forward to 2024
Samsung is the world’s largest manufacturer of computer chips and controls the computer memory market along with SK Hynix and American Micron. Prices for data memory, which is used in nearly all electronic products, fell between 13 and 18 percent in the most recent quarter, according to analysis firm TrendForce.
Samsung Electronics and its competitors have cut production throughout the most recent quarter in hopes of driving up prices.
Inventories remain high despite chipmakers’ attempt to cut supply. While this may help mitigate the price decline, a measurable price increase won’t come until 2024, Trendforce analysts Bryan Ao and Sean Lin of Trendforce write in a new report.
Volatile export economy
The escalation of the trade war between the US and China, in which both countries have imposed restrictions, makes the situation very difficult. South Korea exported 55 percent of all computer chips to China in 2022, with Vietnam and Taiwan coming next with 12 percent and 9 percent, respectively.
Samsung’s share price is up 27 percent since the new year. Foreign investors bought Samsung shares for nearly NOK 100 billion, according to financial institution CLSA. Samsung invested more than NOK 80 billion in the first quarter.
– If demand comes back, they’re ready, senior analyst Sanjeev Rana at CLSA tells The New York Times.
PC and smartphone sales have declined since 2021. In the first quarter, PC sales fell 28 percent to a decade low, according to Counterpoint Research.
South Korea’s central bank noted in a report that the country’s exports are 2.7 times more volatile than Japan’s. The central bank is recommending companies such as Samsung Electronics do more to reduce risks from individual products, including data memory chips.
– Not driving
US chip companies like Nvidia and AMD have ridden the artificial intelligence (AI) wave over the course of the year. Nvidia, which develops advanced computer processors, is the biggest gainer in the stock market with an increase of nearly 200 percent this year.
Nvidia develops advanced graphics cards and data processors, but uses Taiwanese contract manufacturer TSMC for actual production. Nvidia has selected Samsung competitor SK Hynix for a new type of data memory chip for use in its AI processors.
The problem with Samsung is that they always want to be big. They spend a huge amount of money, but they are no longer a leader in technology. Samsung is bigger than Apple at smartphones, but how many people think Samsung is better at smartphones than Apple, asks analyst Nam Hyung Kim at Arete Research, according to The New York Times.
Kyung Kye-hyun, who heads Samsung’s chip division, recently admitted that Samsung is several years behind TSMC.
– We can overtake TSMC in five years. At a university, Samsung’s data chips will be the core of AI computers in 2028, said Keung. Korea Economic Daily.
Samsung has presented very ambitious investment plans. Over the next 20 years, they will invest more than NOK 2,500 billion with the South Korean state in what they call a “mega-block” in Gyeonggi Province to produce computer chips.
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