Samsung is the largest conglomerate in South Korea, and fluctuations in its performance affect the South Korean economy.

(Reuters file photo)

Samsung's revenue accounts for 20% of South Korea's GDP

[Financial Channel/Comprehensive Report] Samsung (Samsung) is the largest conglomerate in South Korea. According to statistics, since 2017, the revenue of the main subsidiaries of the Samsung Group has accounted for 20% of South Korea’s gross domestic product (GDP). Therefore, fluctuations in Samsung's performance will affect South Korea's economic performance.

According to the financial report released by Samsung Electronics, the company's 2022 full-year profit will reach 43.4 trillion won (approximately NT$937.4 billion), of which the semiconductor business will contribute 23.8 trillion won (approximately NT$514 billion).

Looking at each quarter, Q1 is 8.5 trillion won (approximately NT$183.6 billion), Q2 is 9.9 trillion won (approximately NT$213.8 billion), and Q3 is 5.12 trillion won (approximately NT$110.5 billion). The Q4 chip business profit was only 270 billion won (approximately NT$5.8 billion), and the annual growth rate plummeted by nearly 97%, and the profit plummeted.

Please read on...

South Korea's "Central Daily" reported citing insiders in the semiconductor industry that Samsung Electronics' memory chip business lost 3 trillion won (approximately NT$64.8 billion) in the first two months of this year. As the market downturn continues until 2023, Q1 The operating loss in a single quarter may be as high as 4 trillion won (approximately NT$86.4 billion).

In the case of DRAM (Dynamic Random Access Memory) and NAND (storage flash memory) chip prices fell sharply, Samsung suffered heavy losses.

This will also be the first loss in Samsung-related businesses since Q4 2008, when the world was struggling to get out of the financial tsunami.

Samsung Semiconductor Foundry continued to make profits, but not enough to offset losses in the memory business.

(AFP file photo)

Big loss in the memory sector

People familiar with the matter pointed out that the foundry business of Samsung's semiconductor department has a surplus, but the scale of the chip manufacturing department is not enough to reduce the huge loss of the memory business.

It is inevitable that the Device Solution (DS) sector will lose at least 2 trillion won (approximately NT$43.2 billion).

Device solutions had been considered the most important division of Samsung Electronics as it generated the most profit until the sharp drop in semiconductor prices late last year hit the company hard.

The DS sector, including memory, IC and wafer foundry businesses, accounts for more than half of Samsung's operating income, and operating losses will seriously drag down the company's performance.

According to the data released by Samsung Electronics' chip division, the past operating losses occurred in 2008 and 2001, respectively. At that time, the single-quarter losses were less than 1 trillion won (approximately NT$21.6 billion).

But with the price of memory chips collapsing, Samsung's losses may be even more serious this time around.

Memory prices collapsed, causing huge losses for Samsung.

(Bloomberg file photo)

DRAM is still bearish in the first half of this year, Samsung is struggling

According to the annual report released by Samsung Electronics a few days ago, due to the weakening of global chip demand, the inventory of the chip manufacturing sector exploded by 76.6% last year.

Data show that due to weakening demand for memory chips, the inventory of Samsung's chip manufacturing department reached 29.06 trillion won (about NT$627.6 billion) at the end of last year, an increase of 12.6 trillion won (about NT$272.1 billion) from a year ago.

At the same time, the average selling price of wafers fell by 17%.

According to South Korean government data, the average DRAM contract price has dropped from about US$3.4 in the first half of 2022 to about US$2.21 in December.

The (2) monthly average quote for DRAM 8GB DDR4 as a benchmark is $1.81, a quarter of the average price of 4 years ago.

DRAM prices plummeted 34.4% in Q4 last year, further expanding from the 31.4% drop in Q3.

TrendForce, a market tracker, predicts that DRAM prices may drop by 20% in Q1 this year and another 11% in Q2; while NAND chip prices will drop by 10% in Q1 and 3% in Q2.

Under geopolitical tensions, Samsung's investment in China may face huge losses.

The picture shows the Samsung Xi'an factory.

(picture taken from Samsung official website)

Sanctions on Chinese semiconductors cost Samsung a lot

The long-term slump in semiconductor demand may weaken Samsung's performance. The deterioration of the global economic outlook, including high inflation, the European energy crisis and increased financial volatility, will dampen consumer confidence and purchasing power and curb demand.

Weakness in the consumer electronics and home appliance industries will also affect makers of components, including semiconductor chips, displays and other mobile phone parts.

Geopolitical risks will also cast a shadow over Samsung Electronics' memory chip business as the U.S. restricts exports of chip production technology to China.

The US government announced in October last year that it will implement comprehensive export controls to prevent chip manufacturers from shipping equipment to advanced factories in China.

Although Samsung was granted a one-year reprieve, the U.S. government may not extend it beyond October.

Samsung produces about 40 percent of its NAND flash memory for its factory in Xi'an, China, and the U.S. export ban represents a huge loss for the semiconductor giant's investment in China.

Chips are South Korea's main export product. With weak demand, South Korea's economic prospects are worrying.

The picture shows Busan Port.

(AFP file photo)

South Korea's chip inventory hits 26-year high

According to data released by the South Korean Statistics Office in early March (March), the inventory rate of South Korean chip manufacturers soared by 265.7% in January this year, reaching a high point in nearly 26 years since March 1997.

Given that chips are South Korea's main export, South Korea's export and economic prospects are worrying.

South Korea's exports in February this year fell by 7.5% year-on-year to US$50.1 billion (about NT$1.5 trillion), the fifth consecutive month of decline. It is also the first time since 2020 that exports have declined for five consecutive months.

Chip exports plummeted 42.5 percent, dragging down overall performance amid weak global demand amid economic uncertainty.

Excluding semiconductors, South Korea's exports edged up 0.8 percent in February.

Due to the downturn in the global chip market, South Korea's semiconductor overseas sales in February were US$5.96 billion (about NT$183.3 billion), compared with US$10.37 billion (about NT$319 billion) in the same period last year.

South Korean Finance Minister Choo Kyung-ho (Choo Kyung-ho) also admitted when talking about export-related issues that if chip demand does not rebound, the recovery of exports will be limited in the short term.

Grasp the pulse of the economy with one hand I subscribe to Free Finance Youtube channel

Already added friends, thank you

Welcome to 【Free Finance】

feel good

Already liked it, thank you.

related news