Samsung‘s semiconductor business suffered a huge loss of 13 trillion Korean won

Source: Tiantian IC

    Given the global economic slowdown and sluggish storage demand, Samsung Electronics expects semiconductor related business losses to exceed 13 trillion Korean won (approximately 10 billion US dollars) in 2023, marking the first consecutive four quarters of losses for Samsung Electronics.

    However, as storage prices rebounded in the second half of 2023 and customer storage inventories ran out, a glimmer of hope emerged, leading to Samsung‘s semiconductor business losses converging in the fourth quarter of 2023.

    With the expected growth in storage demand in 2024, Samsung expects its semiconductor business to improve, with the goal of turning losses into profits and an annual operating profit exceeding 12 trillion Korean won.

    The industry expects Samsung‘s revenue to be 69.6 trillion Korean won (53.5 billion US dollars) in the fourth quarter of 2023, a year-on-year decrease of 1.1%; The operating profit was 3.5 trillion Korean won, a year-on-year decrease of 17.2%. It is expected that Samsung‘s annual revenue for 2023 will be KRW 260.8 trillion, a year-on-year decrease of 13.6%; The annual operating profit was 7.3 trillion won, a year-on-year decrease of 83.1%, marking Samsung‘s weakest performance since the 2008-2009 financial crisis, with annual operating revenue falling below 10 trillion won.

    Samsung attributed its sluggish performance in 2023 to severe losses in its Device Solutions (DS) division responsible for the semiconductor business. It is expected that the department will experience a cumulative loss of over 12 trillion Korean won in the first three quarters of 2023. Analysts predict that the DS department‘s losses in the fourth quarter will decrease to approximately 970 billion Korean won, while the losses in the first three quarters were 4.5 trillion Korean won, 4.3 trillion Korean won, and 3.7 trillion Korean won, respectively. This indicates that the market is gradually improving, with reduced production and inventory depletion driving a rebound in storage prices.

    With the continuous decline in storage prices for two years, the IT industry, especially markets such as smartphones, PCs, and servers, has recovered, causing circulating inventory to approach normal levels and exceed market expectations. The storage demand has improved, and the operating rate of Samsung‘s factory production lines is gradually increasing.

    KB Financial Group reported that Samsung‘s Xi‘an NAND flash memory factory has experienced production cuts and is expected to recover from a 30% operating rate in the third quarter of 2023 to 40% -50% by the end of 2023. The factory can produce 236 layers of 8th generation 3D NAND, which is expected to enhance cost competitiveness.

    Although Samsung‘s semiconductor business is facing a downturn in 2023, looking ahead to 2024, the company expects its annual operating profit to grow more than fourfold, reaching KRW 33 trillion, and its annual revenue is expected to approach KRW 302.7 trillion.

    Meanwhile, the operating profit of Samsung‘s DS division is expected to shift from a loss of 13-14 trillion Korean won in 2023 to a profit of 12 trillion Korean won.

    In addition, the expansion of high bandwidth memory (HBM) supply will enhance the profitability of Samsung‘s DS division. Industry insiders suggest that Samsung‘s HBM production capacity may double, with a significant increase in production, easing concerns about HBM3 supply shortages.

    Samsung plans to launch an enhanced version of LPDDR5X in the first half of 2024 and begin mass production of the new generation Low Latency Bandwidth (LLW) DRAM. Meanwhile, Samsung‘s second-generation 3nm GAA will be mass-produced at the Taylor factory in the second half of 2024, which is currently under construction and is expected to use 3nm and 4nm processes for production.