Samsung hit by first revenue fall in three years as international chip demand slows

Samsung Electronics has flagged its first revenue fall in almost three years in an indication of the deepening business downturn as demand for digital gadgets fades.

The world’s largest reminiscence chipmaker and smartphone producer on Friday estimated its working revenue for the three months to the top of September at Won10.8tn ($7.7bn), down 32 per cent from a yr earlier.

It was a lot decrease than the Bloomberg estimate of Won12.1tn and marked the primary decline in earnings since 2020. Gross sales got here in at Won76tn, up 3 per cent yr on yr.

The weaker-than-expected revenue steerage comes after US chipmaker Micron Applied sciences and Japan’s Kioxia Holdings minimize spending to counter a provide glut. Superior Micro Gadgets, a US chipmaker, on Thursday minimize its third-quarter income estimate by about $1.1bn from its August forecast.

“The tempo of falling demand for smartphones, PC and TVs may be very quick due to the macroeconomic headwinds. And the tempo of chopping chip orders is quicker due to excessive inventories,” stated Choi Do-yeon, an analyst at Shinhan Securities.

However Samsung shouldn’t be contemplating a reminiscence chip manufacturing minimize but, an govt instructed reporters within the US earlier this week.

The corporate’s semiconductor enterprise head Kyung Kye-hyun expects the reminiscence market to stay sluggish till the top of subsequent yr. He not too long ago instructed staff at an inside occasion that Samsung slashed its second-half chip gross sales steerage by 32 per cent from its April forecast, in accordance with the Korea Financial Every day.

The gloomy outlook has pushed Samsung shares about 30 per cent decrease thus far this yr. However Morgan Stanley this week upgraded the semiconductor sector, driving up shares of Samsung and SK Hynix on expectations of a market rebound within the second half of subsequent yr.

“The semiconductor business has been rattled by the sudden stock adjustment of shoppers amid rising nervousness over the financial outlook,” stated Park Yuak, an analyst at Kiwoom Securities. “Chip costs within the second half could be a lot decrease than anticipated though the stock adjustment is more likely to be over by the primary quarter of subsequent yr.”

Geopolitical dangers are one other space of concern for chipmakers. Washington is predicted to announce new restrictions towards reminiscence chipmakers in China on Friday in a bid to curb Beijing’s technological advances.

Nevertheless, the transfer may impression the Chinese language operations of South Korean corporations, analysts stated.

Samsung has a Nand flash reminiscence chip manufacturing unit within the metropolis of Xi’an whereas SK Hynix runs a Dram chip plant in Wuxi and a Nand plant in Dalian that it purchased from Intel two years in the past.

The South Korean corporations have not too long ago introduced a sequence of offers to construct new factories within the US as a part of President Joe Biden’s Chips and Science Act.