Samsung refuses to cut chip output despite plunging profits

The Korea Times

The Korea Times

Business

Wed, November 29, 2023 | 04:14

Companies

Samsung refuses to cut chip output despite plunging profits

Posted : 2023-01-31 16:28

Updated : 2023-02-01 15:23

Samsung Electronics' chip plant in Pyeongtaek, Gyeonggi Province / Courtesy of Samsung Electronics

Tech giant's operating profit falls 69 percent to 4.31 trillion won in 4th quarter

By Baek Byung-yeul

Samsung Electronics reaffirmed Tuesday that there will be no artificial production cut in its memory semiconductor production, even though the chip giant suffered from plunging profits in the fourth quarter of 2022. Instead, the company aims to proactively respond to chip demand, which it projects will recover in the future.

In its earnings announcement, Samsung said fourth quarter sales dropped 7.97 percent year-on-year to 70.46 trillion won ($57.22 billion), while operating profit plunged 68.5 percent to 4.31 trillion won.

The lackluster earnings stemmed from the poor performance of the memory chip business, which used to account for 70 percent of the company's profit. The Device Solutions (DS) division that supervises the chip business posted 20.07 trillion won in sales and 270 billion won in operating profit in the fourth quarter.

Demand for memory chips fell across all applications, ranging from PCs, smartphones and servers. Samsung said the price of memory chips fell as its clients continued to adjust their inventories.

Despite the sharp earnings decrease at the chip business, Samsung said there will be no cut in its capital expenditures (capex) that include plant and equipment investment as the company expects demand to recover in the medium to long term.

"This year's capex will be at a similar level to last year," Kim Jae-june, executive vice president of Samsung's memory business, told investors during a conference call. "Although the market is weakening, we will continue to invest in infrastructure for mid- to long-term demand."

Samsung's capex in 2022 was 53.1 trillion won and 47.9 trillion won of that money was invested in the semiconductor business.

As the global semiconductor industry has experienced the worst-ever slump, industry experts expected Samsung, the global No.1 memory chipmaker, to announce production cuts. But the official denied such speculation and said, "It is a good opportunity to thoroughly prepare for the future."

Samsung said it will also put more effort into selling high-priced memory chips to meet the growing need for high-density chips for servers.

"In 2023, based on cost competitiveness, the Memory Business plans to expand the proportion of high-value-added products by addressing the demand for high-density server SSDs, responding to the high-density trend of smartphones and PC and strengthening its market leadership," the company said.

For the foundry business, which produces chips based on orders from chip-designing firms, Samsung said producing chips using the 3-nanometer first-generation process is currently proceeding with a stable yield and the development of the 3-nanometer second-generation process is also progressing rapidly.

Overall, Samsung posted annual sales of over 300 trillion won in 2022, for the first time ever. Its 2022 sales rose 8.09 percent from a year ago to 302.23 trillion won.

baekby@koreatimes.co.kr