Samsung Electronics earnings shock rings alarm bell
Samsung Electronics' operating profit in the third quarter plunged 31.7 percent to 10.8 trillion won ($7.6 billion) from a year ago. It could be called an "earnings shock," hovering far below the stock market consensus of 11.86 trillion won. The disappointing result was due to weak semiconductor sales, eclipsing relatively good performance by displays and smartphones. A direct hit came from a DRAM price drop amid weak demand for IT products and a surge in inventory due to the global economic downturn.
The sluggish semiconductor sector, which accounts for 20 percent of exports, is a danger signal. The nation's trade deficit has continued for six months to nearly $30 billion in cumulative total. In August, its current account also turned to a red-ink figure of $3.05 billion. However, dark clouds in the semiconductor industry are unlikely to clear quickly. TrendForce, a Taiwanese market surveyor, predicted that the average sale price of NAND flash products next year would fall more than 20 percent from this year, hinting that the "semiconductor winter" would continue through 2023.
To make matters worse, the U.S. government has effectively prohibited the export of its technology and equipment to Chinese companies producing 18-nano or lower DRAMs and 128-layer or higher NAND flash products. The measure puts the domestic industry on alert. Washington said it would allow exports to other foreign companies, such as Samsung Electronics and SK hynix, through separate reviews. However, Korean companies cannot rule out technology leaks and delayed screening in the review process. The increasing industrial uncertainty could also lead to setbacks in their business in China.
In international relations, there are no eternal friends or enemies. National interest should come first. Nothing showed this better than the U.S. Inflation Reduction Act that discriminated against allies, including Korea, regarding electric vehicles. The government should strengthen its response system by obtaining information about U.S. sanctions against China in advance. Besides, it must strongly demand that the U.S. and China comply with international norms, in collaboration with countries with similar interests, including Europe and Japan.
Samsung Electronics' operating profit in the third quarter plunged 31.7 percent to 10.8 trillion won ($7.6 billion) from a year ago. It could be called an "earnings shock," hovering far below the stock market consensus of 11.86 trillion won. The disappointing result was due to weak semiconductor sales, eclipsing relatively good performance by displays and smartphones. A direct hit came from a DRAM price drop amid weak demand for IT products and a surge in inventory due to the global economic downturn.
The sluggish semiconductor sector, which accounts for 20 percent of exports, is a danger signal. The nation's trade deficit has continued for six months to nearly $30 billion in cumulative total. In August, its current account also turned to a red-ink figure of $3.05 billion. However, dark clouds in the semiconductor industry are unlikely to clear quickly. TrendForce, a Taiwanese market surveyor, predicted that the average sale price of NAND flash products next year would fall more than 20 percent from this year, hinting that the "semiconductor winter" would continue through 2023.
To make matters worse, the U.S. government has effectively prohibited the export of its technology and equipment to Chinese companies producing 18-nano or lower DRAMs and 128-layer or higher NAND flash products. The measure puts the domestic industry on alert. Washington said it would allow exports to other foreign companies, such as Samsung Electronics and SK hynix, through separate reviews. However, Korean companies cannot rule out technology leaks and delayed screening in the review process. The increasing industrial uncertainty could also lead to setbacks in their business in China.
In international relations, there are no eternal friends or enemies. National interest should come first. Nothing showed this better than the U.S. Inflation Reduction Act that discriminated against allies, including Korea, regarding electric vehicles. The government should strengthen its response system by obtaining information about U.S. sanctions against China in advance. Besides, it must strongly demand that the U.S. and China comply with international norms, in collaboration with countries with similar interests, including Europe and Japan.
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