Samsung to continue selective production reduction

2024.03.28 09:14:01 | 2024.03.28 09:14:57

[Graphics by Song Ji-yoon]이미지 확대

[Graphics by Song Ji-yoon]

Samsung Electronics Co. is expected to adopt a flexible reduction strategy by continuing to cut production until the first half of 2024 while expanding supply for products with increased demand.

Sources said on Wednesday that Samsung Electronics is expected to announce its preliminary earnings for the first quarter on April 5th, 2024, with the company traditionally announcing its preliminary results five business days after the end of the fiscal year.

There is particular interest in the company’s first-quarter preliminary results in 2024 as they will indicate whether Samsung Electronics’ device solutions (DS) division can move towards a recovery after overcoming significant losses.

The DS division posted operating losses of 4.58 trillion won ($3.4 billion) in the first quarter of 2023, 4.36 trillion won in the second quarter, 3.75 trillion won in the third quarter, and 2.18 trillion won in the fourth quarter.

The company began to cut production from the second quarter of 2023, gradually improving losses as the market showed signs of recovery.

According to market research firm TrendForce, Samsung Electronics’ revenue in the global DRAM market was $7.95 billion in the fourth quarter of 2023, up 51.4 percent from the previous quarter. Its market share also increased significantly from 38.9 percent to 45.5 percent during the same period.

The relative contraction of supply for general DRAM could also be influenced by competition from other memory semiconductor market competitors such as SK hynix Inc., which for its part is focusing on the profitable high bandwidth memory (HBM) market.

[Source: TrendForce]이미지 확대

[Source: TrendForce]

The NAND market is also booming and according to TrendForce, global NAND revenue was $11.5 billion in the fourth quarter of 2023, up 24.5 percent from the previous quarter.

Industry insiders noted that Samsung Electronics’ DS division is most likely to swing to a profit in the first quarter of 2024, but the market’s attention is now on the profit amount. Securities firms expect Samsung Electronics’ DS division to achieve an operating profit ranging from 200 billion won to 700 billion won in the January to March 2024 period.

Although the chip industry is entering a recovery phase, industry observers noted that Samsung Electronics is likely to maintain its reduction strategy for the foreseeable future. Samsung Electronics is expected to carefully observe market trends rather than prematurely ending reductions, sources said.

Meanwhiole, Samsung Electronics unveiled memory technologies that are leaders in the artificial intelligence (AI) era, such as compute express link (CXL) technology-based memory and high-performance, high-capacity HBM, on Tuesday local time at the MemCon 2024, a global semiconductor conference taking place in Silicon Valley, the United States.

Samsung Electronics said in its keynote speech that in terms of memory capacity, CXL technology and HBM will lead the future AI era in terms of bandwidth and capacity. CXL is a technology that connects central processing units (CPU), graphics processing units (GPUs), and memory semiconductors to increase data processing speed and capacity.

“Following the third generation (HBM2E) and the fourth generation (HBM3) that is currently in production, we will continue to lead the high-performance, high-capacity memory market in the AI era by mass producing the 12-layer fifth generation HBM and 128GB DDR5 products in the first half of this year,” Samsung Electronics’ head of DRAM development Hwang Sang-jun said.

Hwang expected Samsung Electronics’ HBM shipments this year to increase by up to 2.9 times in 2024 compared to the previous year. The company initially set its HBM shipment target for 2024 to be 2.5 times higher than that of the previous year but will expand shipments flexibly in response to customer demand.

For his part, SK hynix President and Chief Executive Officer Kwak Noh-jung noted that orders for HBM will remain “tight” until 2025, adding that “the proportion of HBM in overall DRAM sales will rise to double digit percentages in 2024, which will contribute to profitability.”

Speaking at the company shareholders’ meeting on Wednesday, Kwak responded to questions about why SK hynix, a supplier to HBM, reported a net loss of about 9 trillion won in 2023, unlike Nvidia Corp., which recently announced its outstanding performance.

“The proportion of HBM in overall DRAM sales was only single digits in 2023,” Kwak said. “The majority of DRAM products, which account for most of the revenue, saw price declines and weak demand.”

Kwak also unveiled plans to shift the direction of the NAND flash memory business, which was identified as a cause of losses.

SK hynix will also announce a large-scale investment plan in the United States. Citing sources, The Wall Street Journal reported that SK hynix plans to build an advanced semiconductor packaging plant in West Lafayette in Indiana.

The sources said SK hynix plans to invest $4 billion for the construction of the plant, which is scheduled to begin operations in 2028, and that the company’s board is expected to approve the decision soon.

By Choi Seung-jin, Oh Chan-jon, Lee Duk-joo, and Lee Eun-joo

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