Attendees wait in line beneath a large LED screen displaying smart connected home products to enter the Samsung Electronics booth, during the Consumer Electronics Show (CES) in Las Vegas, Nevada, on January 6, 2023.
Patrick T. Fallon | AFP | beautiful pictures
Shares of semiconductors in Asia fell as South Korean chip giant Samsung Electronics saw its worst profit drop since Q3 2014.
Its fourth-quarter operating profit fell to 4.31 trillion won ($3.4 billion) — down 69 percent year-on-year, when it raked in 13.87 trillion won.
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Operating profit for the last three months of 2022 was the lowest since the quarter ended September 2014, when it recorded 4 trillion won.
This happens when global smartphone shipments drop to low not seen since 2013, marking the biggest drop ever.
Shares of Asian chipmakers tumble as Samsung announces it will continue to spend capital next year, of which they spent a total of 47.9 trillion won on semiconductors by 2022.
Many expect the company to reduce spending further as global demand worsens.
Shares of Samsung Electronics fell 3.6% in Tuesday trading in Seoul. Rivals like SK Hynix also dropped more than 2%, while Taiwan Semiconductor Manufacturing Co also fell 3.9% in Asian trade.
Japanese chip maker Electronics Tokyo down 1.14%, Electronics Renesas down 0.97% while most advantage down 1.7%. Lasertec also decreased by 2.07%.
“Without some meaningful adjustment in production, I think it will be difficult to correct the current mismatch between supply and demand,” SK Kim of Daiwa Capital Markets told CNBC. “Asian street signs.”
American semiconductor manufacturer Micron announced last month that it would cut headcount by 10% by 2023, cutting capital spending, which Kim described as “insufficient”.
“We hope Samsung and other major memory manufacturers [to] cut their production by at least 20%, that’s what we predict from [the] end of this quarter in the second quarter,” Kim said.
Despite worsening economic conditions, Samsung Electronics said it expects demand to recover by the end of the year.
Semiconductors power everything from smartphones to electric cars. We think industry-affected stocks look set to bounce back.
“For 2023, while macroeconomic uncertainties are expected to continue, the Company anticipates demand will begin to recover in the second half of the year,” it said in a statement. Press Release.
“The semiconductor business will continue to strengthen its market and technology leadership position, while expanding its share of advanced nodes and products.”
‘Be prepared to recover’
Private bank JPMorgan says the semiconductor industry offers an attractive spot for investors as chip stocks plummet in 2022.
“Looking at price movements, earnings expectations and [price-to-earnings] many times, the industry appears to be near a cyclical bottom,” strategists Jacob Manoukian and Jonathan Linden said in a report. report released earlier this month, citing data from World Semiconductor Trade Statistics.
“Semiconductors power everything from smartphones to electric vehicles. We think the sector’s stricken stocks look set to rebound,” they wrote.
Yuanta Securities’ Daniel Yoo agrees that it might be time to buy chip stocks.
“I thought it was an opportunity to buy, but the question [mark] that’s whether a really important change happens in the second or third quarters,” he said on CNBC “Asian street signs.”
“We see a significant increase in demand related to data centers or different regions that will continue to grow,” said Yoo. “It’s also likely that AI-related demand will increase this year.”
– Chery Kang of CNBC contributed to this report.
