Samsung to maintain up chip funding, undeterred by 8-year-low revenue By Reuters

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) – South Korea’s Samsung Electronics (OTC:) Co Ltd on Tuesday indicated it has no plan to chop funding in chips this 12 months, at the same time as a weak international financial system condemns the business to its worst downturn in over a decade.

The steerage bucks a broader business development to reduce spending and output, fanning concern that the world’s largest reminiscence chipmaker intends to attract on its deep pockets and superior revenue margins to achieve market share from smaller friends.

“Samsung (KS:) is likely to be seeing this time as a superb alternative to extend market share, which ought to assist it in the long run, on the expense of SK Hynix and Micron,” stated analyst Choi Yoo-june at Shinhan Securities.

Greg Roh, head of analysis at Hyundai Motor Securities, estimated Samsung Electronics’ market share might attain the higher 40% vary for DRAM chips and mid-30% vary for NAND flash reminiscence chips within the second half of the 12 months, from round 43% and 32%.

As a substitute of reducing funding in response to slowing demand and falling costs, Samsung signalled it will curb short-term manufacturing organically via line upkeep, gear adjustment and transferring to superior chipmaking processes. It additionally stated it will improve the proportion of capital funding that goes into analysis and improvement.

“Samsung, in a roundabout manner, is saying manufacturing will lower barely,” stated analyst Kim Yang-jae at Daol Funding and Securities. “Nevertheless, traders had been hoping for a stronger manufacturing lower, or a remark about sooner market rebound – so its shares fell.”

The share costs of Samsung and compatriot SK Hynix Inc fell 3% and a pair of.2% respectively on Tuesday.

Samsung stated capital spending in 2023 can be much like 2022, in distinction to SK Hynix and Micron Expertise Inc (NASDAQ:) which have stated they might slash funding. In contract chipmaking, larger rival Taiwan Semiconductor Manufacturing Co Ltd has additionally introduced a spending lower.

The worldwide expertise business has been battling a pointy and sudden downturn in demand since late final 12 months, as firms lower spending on tech services whereas customers spend much less on discretionary items within the face of surging inflation.

CHIP PROFIT TUMBLES

Earlier on Tuesday, Samsung reported its lowest quarterly revenue since 2014 and stated persistent macroeconomic uncertainty will make for a tricky first half of this 12 months, although it expects demand to start out recovering within the second half.

Sluggish demand and stock adjustment will proceed to influence the chip enterprise within the first quarter, whereas smartphone demand is more likely to decline year-on-year because of financial slowdown in main areas, Samsung stated.

At 4.3 trillion received ($3.49 billion), October-December working revenue was Samsung’s lowest quarterly revenue in eight years. Income fell 8% to 70.5 trillion received.

With reminiscence chip costs falling by double-digit percentages in 2022, Samsung’s chip revenue tumbled – to about 270 billion received within the fourth quarter from 8.83 trillion received a 12 months earlier, marking the bottom because the first quarter of 2009.

Some analysts anticipate the chip enterprise to e-book a loss within the first quarter, pulling total revenue under that of the fourth.

Final week, chipmaker Intel Corp (NASDAQ:) stated it expects to lose cash within the present quarter as the private laptop business experiences a chip glut.

In cellular, Samsung stated fourth-quarter revenue fell to 1.7 trillion received from 2.66 trillion received a 12 months earlier, as a decline in low- and mid-end smartphone gross sales was larger than anticipated.

Samsung plans to unveil its newest Galaxy S flagship smartphones later this week.

($1 = 1,232.6000 received)