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Amidst a challenging economic landscape and unfavourable market conditions, Samsung Electronics faced a major setback in the quarter ended June 2023, as the company recorded its lowest quarterly profit since 2009.
Between April and June 2023, the South Korean tech giant experienced a 95% year-on-year decline in its operating profit, dropping to 669 bn won ($524.09 mn) from the 14.1 tn won ($11.04 bn) recorded in the same period the previous year. Additionally, the company’s revenue also suffered, facing a 22% decrease to 60 tn won ($47 bn) during the same period.
The primary factor contributing to this dismal financial performance is the ongoing chip glut, which resulted in substantial losses in Samsung’s chip division, amounting to 4.36 tn won ($3.41 bn) for the quarter ended June 2023.
This stands in stark contrast to the profit of $9.98 tn won ($7.81 bn) reported by the company’s chips division during a comparable period last year. However, it is worth noting that chip losses in the latest quarter slightly improved compared to the loss of 4.58 tn won ($3.58 bn) registered in the first three months of 2023.
“Global demand is expected to gradually recover in the second half of the year, which should lead to an improvement in earnings driven by the component business. However, continued macroeconomic risks could prove to be a challenge in such recovery in demand,” said the world’s biggest memory chip and smartphone manufacturer.
TSMC, SK Hynix joins Samsung in recording dismal quarterly earnings
Apart from Samsung Electronics, other major chip makers from Asia also witnessed a drop in quarterly earnings in the three months ended June 2023. This includes chip-making giants Taiwan Semiconductor Manufacturing Company (TSMC) and SK Hynix.
TSMC, the world’s largest semiconductor manufacturer, reported a 23% year-on-year decline in its net profit for the quarter ended June 2023, the worst since 2019. Along with that, the company’s revenue amounted to 480.84 bn NT$ ($15.68 bn), showing a year-over-year decrease of 13.7% and a decline of 6.2% from the previous quarter.
“…we now expect the foundry industry to decline mid-teens and our full year 2023 revenue to decline around 10% in U.S. dollar term… we also forecast the fabless semiconductor inventory to exit 4Q ’23 at a healthier and lower level as compared to our expectation 3 months ago,” said TSMC CEO C.C. Wei.
Meanwhile, SK Hynix, the world’s second-largest maker of dynamic random-access memory chips after Samsung Electronics, saw its revenue plunge by 47% year-on-year to 7.31 tn won ($5.72 bn) between April to June 2023. The company’s operating loss for the quarter stood at 2.88 tn won ($2.25 bn), and its EBITDA declined by 92% year-on-year to 0.61 tn won ($477.87 mn).
However, despite weak quarterly performance by some of Asia’s largest chip-making companies, the long-term outlook for the sector looks bright.
“For 2023, early projections from Statista indicate that global semiconductor sales for the year will suffer a minor decrease…Semiconductor players in Asia will face short-term challenges,” said YCP Solidiance.
“Still, the market’s long-term outlook remains broadly positive as players within the region continue to make investments that will help strengthen the industry’s foundation for years to come,” the management consulting firm added.
