© Reuters. FILE PHOTO: Visitors passes a Samsung Electronics Co digital billboard within the Instances Sq. space of Manhattan in New York Metropolis, U.S. March 2, 2023. REUTERS/Chris Helgren
By Joyce Lee and Heekyong Yang
SEOUL (Reuters) – Samsung Electronics (OTC:) Co Ltd mentioned on Friday it could make a “significant” lower to chip manufacturing, following the lead of smaller rivals, because it grapples with a pointy international downturn in semiconductor demand that has despatched costs plummeting.
The bizarre output lower by the world’s greatest reminiscence chipmaker – with no earlier announcement recalled by Samsung (KS:) officers and analysts – got here after it flagged a worse-than-expected 96% plunge in first-quarter revenue.
Traders disregarded the revenue miss, betting the transfer by the trade chief would help chip costs that had fallen by about 70% over the past 9 months.
Samsung jumped 4.5% in early buying and selling within the greatest one-day rise since September, whereas rival SK Hynix Inc’s shares surged 5.6%.
Smartphone and private laptop makers had stocked up on chips in the course of the pandemic when demand for client units surged, however they’re now working down inventories as consumers reduce on purchases amid rising inflation.
Samsung mentioned reminiscence demand had dropped sharply due to a weak international economic system and clients slowing purchases as they centered on utilizing up their shares.
“We’re reducing the manufacturing of reminiscence chips by a significant degree, particularly that of merchandise with provide secured,” it added, in a reference to these with ample inventories.
Samsung didn’t disclose the dimensions of the deliberate manufacturing lower, but it surely despatched a robust sign for a corporation that had beforehand mentioned it could make small changes like pauses for refurbishing manufacturing strains however not a full-blown lower.
“The truth that the No. 1 market share agency is becoming a member of manufacturing cuts lifted shares… SK Hynix and Micron (NASDAQ:) have declared manufacturing cuts, however solely Samsung had not, so the market was looking forward to it,” mentioned John Park, an analyst at Daishin Securities.
“In the present day’s manufacturing lower sign casts a constructive outlook for a reminiscence chip rebound within the second half of the yr.”
Though slicing short-term manufacturing, Samsung mentioned it was nonetheless making long-term investments in infrastructure and analysis to safe wanted clear rooms for chip manufacturing and develop its technological lead.
It didn’t say how its 2023 funding plans could be affected, having beforehand flagged capital spending just like the 53.1 trillion gained funding in 2022.
SK Hynix mentioned in October it could greater than halve its capital spending in 2023 versus 2022, whereas Micron lower fiscal 2023 funding plans by greater than 30% in September.
Graphic: Samsung revenue falls to lowest in 14 years – https://www.reuters.com/graphics/SAMSUNGELEC-RESULTS/gkvlwjwrwpb/chart_eikon.jpg
RECORD CHIP LOSS
Samsung estimated its working revenue fell to 600 billion gained ($455.5 million) in January-March, from 14.12 trillion gained a yr earlier, in a brief preliminary earnings assertion. It was the bottom revenue for any quarter in 14 years.
The primary-quarter revenue fell wanting a 873 billion gained Refinitiv SmartEstimate, weighted towards analysts who’re extra persistently correct. A number of estimates had been revised down earlier this week.
Its chip division is more likely to report a document lack of 2.1 trillion gained ($1.6 billion), in keeping with a mean of analyst forecasts, and put up one other 2 trillion gained loss within the present quarter, a significant divergence for what had been Samsung’s most vital money cow, producing about half of its earnings in higher years.
Analysts mentioned Samsung’s manufacturing lower may enhance its efficiency barely within the present quarter and will additionally cement or hasten the rebound of reminiscence chip costs.
“Samsung speaking about manufacturing cuts is proof of how dangerous the present droop actually is,” mentioned Greg Roh, head of analysis at Hyundai Motor Securities.
The corporate is because of launch detailed earnings, together with divisional breakdowns, later this month.
($1 = 1,319.0000 gained)
