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Soft demand for memory chips is hurting the Korean manufacturers


Tuesday, December 20, 2022

South Korea's leading semiconductor makers Samsung Electronics and SK hynix face a grim outlook in their fourth quarter sales due to sluggish demand for memory chips, a report said on Monday.

In a report, Daol Investment and Securities forecast that Samsung Electronics, the world's largest memory chip and mobile phone maker, would log sales of 73.2 trillion won ($56.2 billion) in the fourth quarter this year, down 4.4 percent than the previous year. Operating profit would plunge by 45.8 percent to record 7.5 trillion won, the report said.

Kim Yang-jae, the Daol analyst who authored the report, said the disappointing forecast is due to weakening prices and demand for memory chips in the global market.

"The overall demand of memory semiconductors will go down, and (Samsung’s) mobile phone business will also struggle, as the popularity of the new Galaxy Fold and Z Flip will wane,” Kim said.

“The price of memory chips is also going down, so Samsung may even witness a minus growth rate in sales by the second quarter next year, if it does not cut production.”

The report forecast Samsung’s annual sales in 2023 to post 293.3 trillion won, which would be down by 3.8 percent when compared to the previous year. The operating profit is expected to go down by 42.3 percent to record 26.8 trillion won.

The outlook is gloomier for SK hynix, a leading memory chip supplier. In a separate report, Kim forecast that SK hynix would go into the red in the fourth quarter this year, with quarterly sales posting at 8 trillion won, down by 34.7 percent on-year. When compared to the previous quarter, the figure would be a decline of 26.4 percent.

The sales downturn would put the company in the red, with an operating loss of 1.1 trillion won, the analyst said.

The report forecast that SK hynix would record annual sales of 31.3 trillion won and an operating loss at 3.8 trillion won in 2023.

“Deterioration in performance is inevitable (for SK hynix) due to its unsold stock of NAND and deficit in DRAM sales," Kim said.

“Some memory chip makers introduced discounts to empty their stocks. But client firms are not making purchases, as they expect the price of chips to go down in the first half of next year,” Kim added.

By: DocMemory
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