Business
Samsung profit could hit 14 years low with a huge 92 percent drop
Samsung Elec’s profit in the first quarter of 2023 is reported to have dropped 92 percent, hitting the lowest for any quarter in 14 years. Since the company is facing huge losses in its most precious chip business, the global economic slowdown further drops profits.
The recently launched Samsung Galaxy S23 series is said to have boosted first-quarter profit, but it can’t fill the gap vacant by the semiconductor business. Samsung’s chip division likely reported quarterly losses of over $2.3 billion as memory chip prices fell and inventory values were slashed.
This Friday, the South Korean tech giant is expected to announce the preliminary first-quarter results, while full results could release later this month. Operating profit likely fell to 1.08 trillion won in the quarter that ended March 31, according to a Refinitiv SmartEstimate from 27 analysts.
The data compiled by the company suggest that it is the lowest since a 590 billion won profit in the first quarter of 2009, which compared with an operating profit of 14.12 trillion won last year. If the study becomes true, Samsung’s various business divisions may face pressure.
Per TrendForce data (via Reuters), prices of DRAM memory chips, widely used in smartphones, PCs, and servers dropped about 20% during the first quarter of this year, while prices for NAND flash chips used in data storage fell about 10% to 15%.
Back in February, the company disclosed that it planned to borrow 20 trillion won from Samsung Display to use as operational funds until August 2025. However, estimates show that Samsung’s mobile business could drop by 9% to 3.46 trillion won in the March quarter.
While demand for smartphones is sluggish overall, premium models are more resilient. Profits were supported by high-end flagships such as the recently launched Galaxy S23 series, which accounted for about 20% of total sales, said IBK Investment & Securities analyst.
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A new report reveals that Samsung will participate as an anchor investor for Arm’s upcoming IPO after taking a conservative approach to the matter due to a perceived overvaluation and regulatory risk.
Samsung opted to make an investment in the chip designer, joining a slew of other industry players including Apple, Nvidia and Intel. Amazon, which was earlier rumored to be participating in the IPO, decided to step out.
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It’s worth mentioning that the strategic investors have agreed to invest between $25 million and $100 million each. The specific amount for each company hasn’t been disclosed yet.
This means the offering price will come in between $47 and $51 per share. It makes Arm’s valuation between $50 billion and $55 billion, down from the initial estimation of $64 billion.
Arm’s IPO on Nasdaq, which is expected in September, is considered to be the biggest IPO deal of the year. The company controls a majority of the world’s application processor market, designing and licensing basic blueprints for chips.
Market research firm TrendForce published the latest report on their analysis. The agency disclosed that after global smartphone production dropped by nearly 20% year-on-year in the first quarter, production continued to decline by about 6.6% in the second quarter, to 270 million units.
In particular, the global smartphone production in the first half of 2023 was 520 million units, a 13.3% decline compared to the same period last year. Both individual quarters and the first half of the year in total set a ten-year low.
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TrendForce analysts pointed out that there are three reasons for the sluggish production performance:
- First, the lifting of epidemic prevention restrictions did not drive demand as expected;
- Secondly, the demographic dividend effect of the emerging Indian market has not effectively exerted its advantages;
- Thirdly, in 2022, brands will be deeply affected by excessive channel inventory. It was originally expected that as inventory is reduced, brands will return to production levels.
However, now affected by economic weakness, people’s consumption willingness is more conservative, resulting in poor production performance in the first half of the year. expected.
Second Quarter Market
In the second quarter, Samsung still topped the list, with Q2 output reaching 53.9 million units, a decrease of 12.4% from the previous quarter. The same period coincided with the replacement of old and new Apple models, with output of 42 million units, a decrease of 21.2% from the previous quarter.
Adding to this, the most obvious change in the smartphone market was Transsion (including TECNO, Infinix, and itel). Transsion surpassed vivo and entered fifth place in the world for the first time. Its output increased by more than 70% month-on-month to 25.1 million units.
Production
In addition to Samsung and Apple, Xiaomi (including Xiaomi, Redmi, and POCO) produced approximately 35 million units in the second quarter, an increase of 32.1% from the previous quarter.
OPPO (realme, and OnePlus included) produced about 33.6 million units in the second quarter, an increase of 25.4% from the previous quarter. Q3 is expected to have a growth rate of about 10-15%, closely following Xiaomi.
Samsung and SK Hynix are strengthening their foray into the GDDR (Graphic Double Data Rate (GDDR) market amid the global gaming surge. The companies appear to be preparing to lead the GDDR market while gaining technological advantage in next-generation products.
Recently, IGI (Industry Growth Insights) published its new report citing that the GDDR market will grow from $3.2 billion in 2018 to $4.8 billion in 2030 with an average annual growth rate of 7.6%. It’s predicted that high-performance GDDR like GDDR6 will record a double-digit growth rate every year.
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Samsung x GDDR
In July, Samsung Electronics developed GDDR7, the industry’s most advanced product, for the first time, and supplied samples to Nvidia for verification for next-generation system installation. SK Hynix also plans to complete GDDR7 development within this year.
On the other hand, Micron plans to introduce GDDR7 in the first half of next year, a step later. In this situation, Nvidia, the world’s largest customer in the GPU market, is known to preferentially review Samsung Electronics’ products instead of Micron’s next-generation products.