Samsung and SK Hynix may see operating loss for memory businesses in 1Q23

As there is no end in sight for the global memory demand slump, South Korea-based suppliers may see their memory business turn into an operating loss, a rarely-seen situation for the duo.

Korea Herald reported that according to Samsung's regulatory filing to DART, its inventory reached KRW52.2 trillion (US$39.9 billion) for the fourth quarter of 2022, up from KRW41.4 trillion from a year earlier and a record-high for the memory giant. Among the sum of KRW52.2 trillion, an inventory of KRW29.1 trillion comes from the DS business segment, which includes memory, IC, and foundry businesses, up 76% annually. DART's data show that another Korea-based memory provider, SK Hynix, saw its inventory rise to KRW15.7 trillion, an annual growth of 75%.

According to Korea Herald, KB Securities expects the prices of DRAM and NAND to drop by a further 19% and 18%, respectively, for the first quarter of 2023, with the Korean memory duo expected to post operating losses for the quarter. The report quoted an analysis by FnGuide saying that Samsung Electronics may log an operating loss of between KRW1.91-4.47 trillion, and SK Hynix may record an operating loss of KRW3.11 trillion.

In early March, Korea JoongAng Daily quoted sources as saying that Samsung Electronics might post up to KRW4 trillion operating loss from the memory chip business in the quarter that ended in March, which may be the first operating loss since the fourth quarter of 2008 when the global financial crisis erupted.

Bloomberg Intelligence's analysts Masahiro Wakasugi and Brian Moran said in a research note that as South Korea's exports of DRAM and NAND in February remained weak, Samsung Electronics and SK Hynix may post lackluster earnings for the first quarter, with demand not recovering until the year's second half.

According to World Semiconductor Trade Statistics, the global memory market would decline by 12.6% by value in 2022 and 17% in 2023, and 2023 may see the first semiconductor market drop in four years.

Source: Bloomberg, March 2023

Source: Bloomberg, March 2023