TechSpot
Why it matters: Samsung's memory chip business is off to a rough start this year following a terrible Q4 2022. The division will show an operating profit loss for the first time in 15 years.
What hurts the most is that it was Samsung's most profitable arm until late last year. Samsung's memory chip division lost $2.3 billion US in the first two months of 2023. Insiders told news outlet Korea JoongAng Daily that losses for the entire quarter will likely be more considerable. An internal report estimated the company could take a hit as high as $3.04 billion for Q1 2023.
"Internally, there was a report projecting up to 4 trillion won in operating losses from the memory chip business in the first quarter," one of the sources said. The downturn is notable, considering Samsung's memory chip foundry has not reported a loss since Q4 2008. Worse yet, the rest of its semiconductor arm, which is turning a profit, likely won't offset the losses.
Overall, Samsung expects its Device Solution (DS) business, encompassing all of its silicon ventures, to lose at least 2 trillion won ($1.52 billion US) in Q1 2023. It's a hard pill for the company to swallow since the DS division was Samsung's most profitable branch until late last year. It dwarfed all other arms by a longshot, bringing in $21.6 billion of the company's $33.1 billion in total operating profit in 2022.
And that was despite the division's dismal fourth quarter, which plunged 97 percent from 2021 to 270 billion won ($205 million US). The tanking was mostly attributed to NAND and DRAM prices plummeting.
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Samsung is expected to report an operating loss of US$3.04 billion (~RM13.61 billion) during the first quarter of this year alone for its memory chip division, and there’s a month to go before it’s over. In the first two months alone, the Korean tech giant said that the division’s losses were already sitting at US$2.3 billion (~RM10.30 billion).
“Internally, there was a report projecting up to 4 trillion won in operating losses from the memory chip business in the first quarter,” a source within Samsung told the Korean news publication, JoongAng Daily. In retrospect, this is the first time the brand will be reporting a loss in 15 years.
The last time it reported a loss was back in 2008, during the financial crisis that saw the bankruptcy and shuttering of Lehman Brothers.
If that wasn’t bad enough for Samsung and its memory chips division, what does add insult to injury is that the rest of its semiconductor division, which has actually been turning a profit, is unlikely to help the memory chips division to offset the losses.
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| Image source: Samsung |
Then, almost as though to pour salts into an already gaping wound, a recent forecasting report by TrendForce predicts that the prices of DRAM are expected to fall approximately 20% during this quarter, followed by a further 11% in the next quarter.
And that’s on top of the 34% decline in DRAM prices that occurred during the second half of 2022. And if that doesn’t paint a picture of just how desperate Samsung’s situation with its memory chips division is, the Korean giant was forced to borrow money from its Display division, in order to cover its continued investments within the semiconductor business.