Samsung memory chip foundry set to lose $3.04 billion in Q1 2023

Why it issues: Samsung’s reminiscence chip enterprise is off to a tough begin this yr following a horrible This autumn 2022. The division will present an working revenue loss for the primary time in 15 years. What hurts probably the most is that it was Samsung’s most worthwhile arm till late final yr.

Samsung’s reminiscence chip division misplaced $2.3 billion US within the first two months of 2023. Insiders informed information outlet Korea JoongAng Each day that losses for the whole quarter will doubtless be extra appreciable. An inside report estimated the corporate might take a success as excessive as $3.04 billion for Q1 2023.

“Internally, there was a report projecting as much as 4 trillion received in working losses from the reminiscence chip enterprise within the first quarter,” one of many sources mentioned.

The downturn is notable, contemplating Samsung’s reminiscence chip foundry has not reported a loss since This autumn 2008. Worse but, the remainder of its semiconductor arm, which is popping a revenue, doubtless will not offset the losses. General, Samsung expects its Machine Answer (DS) enterprise, encompassing all of its silicon ventures, to lose at the least 2 trillion received ($1.52 billion US) in Q1 2023.

It is a arduous capsule for the corporate to swallow because the DS division was Samsung’s most worthwhile department till late final yr. It dwarfed all different arms by a longshot, bringing in $21.6 billion of the corporate’s $33.1 billion in whole working revenue in 2022. And that was regardless of the division’s dismal fourth quarter, which plunged 97 p.c from 2021 to 270 billion received ($205 million US). The tanking was principally attributed to NAND and DRAM costs plummeting.

As of March 2, 2023, contract prices for 8GB of DDR4 DRAM had been all the way down to $1.83 — 75 p.c decrease than 4 years in the past. TrendForce predicts DRAM costs will fall about 20 p.c in Q1 2023 and one other 11 p.c in Q2. It is a steep decline contemplating DRAM dropped 34 p.c within the second half of 2022. Likewise, analysts anticipate NAND costs to proceed to tumble, falling 10 p.c within the first quarter and three p.c within the second.

It has gotten so dangerous that Samsung’s DS division borrowed 20 trillion received from Samsung Show to cowl semiconductor investments.

“The transfer was inevitable on condition that its money cow DS division is anticipated to endure a loss for the primary time in 15 years, and abroad subsidiaries have many of the firm’s money reserves,” KB Securities analyst Jeff Kim informed Korea JoongAng Each day.

The excellent news is that the corporate will stay within the black due to its giant market shares within the smartphone and home equipment sectors, which proceed to show wholesome earnings. Kim mentioned that Samsung is not going to cut back its capital expenditures this yr and mustn’t need to resort to “artificially” slicing again semiconductor manufacturing.

Picture credit score: Business Wire