By hmimcu 
Recently, Samsung submitted a dismal quarterly report. According to the financial report, Samsung’s operating profit for the first quarter was 600 billion Korean won (approximately 3.13 billion yuan), a year-on-year sharp drop of nearly 96%!
This is also the first time in 14 years since the first quarter of 2009 that Samsung Electronics’ quarterly operating profit has dropped below 1 trillion Korean won.
The most tragic one was Samsung’s semiconductor division, which experienced a loss in its flash memory business in the fourth quarter of last year. Samsung’s dynamic random access memory business also turned into a loss in the first quarter of this year.
According to Hong Kong securities firm CITIC Lyon Securities, Samsung Electronics’ semiconductor division will experience an operating loss of 3.3 trillion won in the first quarter. The semiconductor department has always been Samsung Electronics’ main source of profit, contributing 80% of the company’s profits at its peak. However, since last year, the proportion of profits contributed by this department has been decreasing.
Along with the financial report, Samsung also changed its previous attitude of “resolutely not reducing production” and announced a reduction in production of storage chips, but did not disclose the specific scale of the reduction. Samsung Electronics said, “Samsung is adjusting to ensure additional supply of products as the center, reducing memory production to meaningful levels, and optimizing production line operations that are already underway
In the statement, Samsung stated that due to the global economic downturn suppressing consumer spending on electronic products, demand for storage chips has declined, and most corporate customers continue to adjust their inventory to cope with deteriorating financial conditions.
On the other hand, Taiwanese media has reported a heavyweight piece of news, stating that due to a decrease in customer orders and a contraction in export orders, Samsung wafer foundry has had to lower prices to compete for orders!
According to reports, due to the drastic inventory adjustment in the PC and consumer product markets compared to expectations, it has affected the mature wafer foundry process and some relatively advanced 7/8nm production capacity utilization. TSMC and Samsung are unable to escape the impact, especially Samsung’s wafer foundry customer base is more concentrated, and the impact is more significant.
Market researchers have stated that Samsung’s strategy of cutting prices and grabbing orders may lead to some sporadic orders. This is mainly due to some customers considering supply chain risk resilience and hoping for a more diversified supply source, taking advantage of this opportunity to increase their second supply source. Most of the market is still controlled by TSMC.
The supply chain points out that Samsung wafer foundry previously quoted slightly lower prices than its peers, but overall market demand is still sluggish. Samsung will reduce its quotation by 10%, which is bound to become the basis for IC design factories to negotiate prices with other wafer foundry factories. “If you don’t lower the price, I will switch to Samsung production,” which puts pressure on the wafer foundry industry.
According to the latest TrendForce survey, as of the end of the third quarter of last year, Samsung wafer foundry had a global market share of 15.5%, ranking second. Although it significantly lagged behind TSMC’s 56.1% market share, it was close to the combined third to fifth place companies of Liandian, Grid Semiconductor, and SMIC International.
01. Domestic chip giants also submit “explosive” quarterly reports
It’s not easy for overseas giants, and the same goes for domestic ones. Recently, domestic chip giant Weil Corporation also submitted a “Thunderstorm” quarterly report.
On April 18th, A-share chip leader Weir Co., Ltd. disclosed its first quarter report for 2023, with a cliff like decline in net profit. The quarterly revenue was 4.335 billion yuan, a year-on-year decrease of 22%; The net profit for a single quarter was 199 million yuan, a year-on-year decrease of 77.81%; The net profit after deduction was only 21.9645 million yuan, a year-on-year decrease of 98%. It can be said that it was the worst quarterly performance since the company went public.
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Among them, the semiconductor design business revenue of Weir Group achieved 16.407 billion yuan, accounting for 82.15% of the main business revenue, a decrease of 19.49% compared to the previous year; The semiconductor distribution business achieved a revenue of 3.565 billion yuan, accounting for 17.85% of the company’s main business revenue, a decrease of 2.6% compared to the previous year, and the performance of various business lines showed a comprehensive decline.
It is worth noting that the gross profit margin of the company’s semiconductor design business decreased from 37.9% in 2021 to 35.16%, while the gross profit margin of the semiconductor distribution business decreased from 15.05% in 2021 to 9.04%. Weir Corporation stated in the announcement that the revenue scale and product gross profit margin of its semiconductor design and sales business have decreased compared to the average year of 2021, mainly due to a decline in demand for consumer electronics, resulting in a decrease in shipment volume. At the same time, due to high inventory in the semiconductor industry, price competition is fierce, and the unit price of product sales has decreased.
The semiconductor product design business of Weir Corporation mainly consists of three business systems: image sensor solutions, touch and display solutions, and simulation solutions. Among them, image sensor solutions account for the largest proportion of the company’s business. According to the 2022 financial report, the image sensor solutions business achieved a revenue of 13.675 billion yuan, accounting for 68.47% of the main business revenue.
It can be seen that Weir’s image sensor business in 2022 came from the revenue of the smartphone market, which decreased from 9.708 billion yuan in 2021 to 5.397 billion yuan, a decrease of 44.4%, which is the main reason for its net profit declining by 77.88% year-on-year.
However, the booming automotive electronics market has brought new growth points to Weir Holdings. In 2022, the revenue from the automotive market in Weir’s image sensors increased from 2.321 billion yuan in 2021 to 3.633 billion yuan, an increase of 56.55%. In 2022, the revenue of the company’s image sensor business from the medical market increased from 390 million yuan in 2021 to 777 million yuan, an increase of 99.02%.
In addition, Weir Group is actively expanding its market in AR/VR, drones, and other emerging equipment fields. In 2022, the company’s revenue from emerging markets for image sensor business increased from 565 million yuan in 2021 to 824 million yuan, an increase of 45.77%.
As is well known, the consumer electronics market experienced a cold winter last year, and the entire industry is still in a difficult state of destocking to this day. Relevant upstream and downstream components are also hindered. Although the inventory of Weir Group has been declining for two consecutive quarters, the inventory scale at the end of the first quarter still exceeds 10 billion yuan. The industry believes that due to the lack of recovery in consumer electronics demand, proactive destocking remains the main theme of Weir Holdings in the second quarter.
From the current perspective, the decline of Weir Shares has not changed. In the industry’s view, the timing of its performance reversal still depends on the global semiconductor industry trend. For the forecast for 2023, Weir Holdings stated that weak demand from businesses, personal computers, and smartphones, rising chip inventory levels, and continued weakness in the memory market have limited the growth of the semiconductor market.
Weir Corporation also stated that in the future, with the rapid penetration of application scenarios such as intelligent devices, the Internet of Things, and the Internet of Vehicles, the demand for intelligent interaction with electronic devices will continue to drive Weir Corporation’s continuous iteration and innovation. At that time, the company will also exhibit even more vigorous growth potential.
02. The development of the global semiconductor industry is not optimistic
From a domestic perspective, in fact, the downturn in the consumer electronics industry last year not only affected Weir Group. Recently, the leading consumer electronics company Goethe Group also released its annual report for 2022 and first quarter report for 2023. The financial report shows that the company’s revenue was 104.894 billion yuan last year, a year-on-year increase of 34.10%; The net profit was 1.749 billion yuan, a year-on-year decrease of 59.08%. In the first quarter of this year, the company’s revenue was 24.122 billion yuan, a year-on-year increase of 19.94%; The net profit was 106 million yuan, a year-on-year decrease of 88.22%.
Due to receiving a government subsidy of 92.95 million yuan, Geer’s net profit after deduction in the first quarter was only 15.11 million yuan. Regarding the significant decline in performance, Goethe Group stated that due to factors such as the downturn in the consumer electronics industry and the fact that important projects have not yet resumed production, net profit has been significantly affected.
On the foreign side, semiconductor giants have overturned their connections. Intel took the lead in stepping on the thunder, with financial reports showing that the company’s revenue in 2022 was $63.1 billion, a year-on-year decrease of 20%; Net profit was $8 billion, a year-on-year decrease of 60%. Among them, there was a loss of $661 million in the fourth quarter; The second quarter financial report of the 2023 fiscal year disclosed by storage giant Micron shows that its revenue is 3.69 billion US dollars, a year-on-year decrease of 53% and a month on month decrease of 10%; A net loss of 2.3 billion US dollars, setting the largest quarterly loss in history. You know, there are more than just one or two overseas companies with such poor performance.
From this perspective, the global semiconductor industry has suffered heavy losses due to the downturn in the consumer electronics market.
According to the Semiconductor Industry Association (SIA), the global semiconductor industry’s sales in January 2023 were $41.3 billion, a decrease of 5.2% from December 2022 and 18.5% from January 2022.
Among them, the Chinese market decreased by 8.0% month on month and 31.6% year-on-year. And according to IDC’s market forecast, this year’s semiconductor inventory adjustment will continue for the first three quarters of this year. In this context, many semiconductor manufacturers have been affected. It can be seen that the development of the global semiconductor industry is not optimistic.