According to inside sources, Samsung Electronics lost $2.3 billion from its memory chip business in January and February.
The South Korean multinational is likely to lose $3 billion by the end of March due to the continued market downturn in 2023. It is the first loss for the division since the fourth quarter of 2008.
“Internally, there was a report projecting up to 4 trillion won ($3.1 billion) in operating losses from the memory chips business in the first quarter,” according to the source.
Steep declines in prices of dynamic random-access memory (DRAM) and NAND flash chips are now a considerable cause of concern.
The benchmark 8GB of DDR4 DRAM stood at $1.81 towards the end of last quarter, about a quarter of what it was four years ago.
DRAM prices fell 34% in the second half of last year. Market tracker TrendForce estimates that DRAM prices will decrease 20% in the first quarter and another 11% in the second quarter. Meanwhile, it estimates that NAND prices will fall over 10% in the first half of this year.
Reverse in fortunes
The device solution (DS) division of Samsung Electronics had been the most profitable division of the firm. In 2022 overall, the chip division recorded a profit of over $18.1 billion.
That was despite its fortunes nosediving in the final quarter of last year. Samsung Electronics still reported a $206 million operating profit, but that was down 97% year on year.
If you will excuse the pun, the memory market can be volatile. In 2008 and 2001, Samsung’s semiconductor division reported operating losses of $762 million.
Samsung stays strong
We need not fear for the financial health of Samsung as a whole. Samsung Electronics borrowed $15.2 billion from Samsung Display, a subsidiary, to fund semiconductor investments.
The company has no plans to cut back production of semiconductors.
KB Securities analyst Jeff Kim said: “The move was inevitable given that [Samsung’s] cash cow DS division is expected to suffer a loss for the first time in 15 years and overseas subsidiaries have most of the company’s cash reserves.”
Even if Samsung Electronics suffers billions of dollars of losses, the mother company will remain profitable due to its dominance in smartphones and appliances.
However, other companies reliant only on memory chips, such as SK hynix, may have a tough few months ahead.
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