Samsung Electronics’ semiconductor sales exceeded 28 trillion won for the first time in the second quarter. Thanks to this, Samsung Electronics recorded the second highest sales in Q2 history. However, it was found that none of them performed well in smartphones, TVs, and home appliances except for semiconductors. In the second half of the year, it is predicted that it will not be easy to maintain earnings as even the semiconductor market is at risk.
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○ Semiconductor sales surpassed KRW 28 trillion for the first time in the second quarter
Samsung Electronics announced on the 28th that it achieved sales of 77.2 trillion won and operating profit of 14.1 trillion won in the second quarter of this year. Compared to the same period last year, sales increased 21.3% and operating profit increased by 12.2%. Looking at the second quarter alone, it is the highest level ever recorded. It is evaluated that the company made a good move despite the global economic downturn and supply chain contraction.
Nevertheless, the market reaction is that it is disappointing that the upward trend of earnings has been weakened. After exceeding 70 trillion won in sales for the first time in the third quarter of last year, Samsung Electronics set a new record for three consecutive quarters of sales until the first quarter of this year. Compared with the previous quarter, sales in the second quarter decreased by 0.74% and operating profit by 0.17%.
Some are concerned that the ‘concentration phenomenon’ could be poisonous, to the extent that the semiconductor sector accounts for more than 70.8% of the total operating profit. In the second quarter of this year, the DS (device solution) division, which is in charge of the semiconductor business, posted 28.5 trillion won in sales and 9.98 trillion won in operating profit. Following the first quarter, semiconductor sales also broke the record for the highest quarterly sales.
The main reason for earnings improvement was the strong performance of not only memory semiconductors, such as DRAM and NAND flash, but also system semiconductors, which are the existing flagship businesses. Operating profit of system semiconductors increased 61% from the previous quarter, recording the highest level in the history of the quarter. A Samsung Electronics official explained, “The exchange rate effect also had a positive effect, resulting in solid results.”
On the other hand, the smartphone and home appliance businesses were sluggish. The mobile experience (MX) and network division, which is in charge of the smartphone business, posted only 29.34 trillion won in sales and 2.62 trillion won in operating profit in the second quarter. Compared to the same period of the previous year, sales increased by 29.4%, but operating profit decreased by 19.1%. Operating profit from the TV and home appliances business was only 360 billion won. This is a 66% decrease compared to the same period last year (1.6 trillion won). It is analyzed that the impact on consumer sentiment is weakening due to high interest rates and high inflation. A decrease in sales due to a slowdown in global demand and an increase in raw material and logistics costs also took a direct hit.
○ Semiconductors are difficult in the second half of the year
The outlook for the second half of the year is not as rosy as the outlook inside and outside the market. Demand for home appliances and smartphones has been dampened due to a contraction in consumption caused by the realization of the global economic downturn, and the industry situation in the semiconductor sector, a core business, is also expected to deteriorate. Samsung Electronics also predicted that market uncertainty would remain at a high level.
“We will flexibly supply products through inventory utilization and flexibly review short-term facility investment plans,” said Han Jin-man, head of strategic marketing department of Samsung Electronics’ memory business division during an earnings conference call on the same day.
The Russian-Ukraine war and prolonged Chinese city blockades are considered as major negative factors. It is explained that the problem of supply of parts continues these days, and delays in warehousing of production facilities continue. Vice President Han said, “Because there are structural limitations in production, DRAM production next year is expected to be at a fairly low level in terms of industry growth.” Samsung Electronics plans to focus on the production of high-value-added and high-capacity products.
Gartner, a market research firm, also downgraded its global semiconductor sales growth forecast for this year to 7.4%. It was lowered by 6.2 percentage points from the forecast of 13.6% announced in the previous quarter. Gartner predicts that semiconductor sales next year will be lower than this year.
The lack of a ‘salvation pitcher’ to replace semiconductors is also considered a fatal weakness for Samsung Electronics. The smartphone, TV, and home appliance divisions show no signs of recovery in 2H. Kim Seong-gu, managing director of Samsung Electronics’ MX Division, said, “We have lowered the target set at the beginning of the year” for the smartphone market in the second half of the year.
According to Wise Report, a financial information company, Samsung Electronics’ annual sales consensus for this year (average expected by securities companies) in April was 32,566.8 billion won, but as of this month, it has been lowered by 1.7% to 319.679.6 billion won in three months. The operating profit forecast for the same period was also lowered by 10% from 62.99 trillion won to 56.68 trillion won.
Reporter Jung Ji-eun/Bae Seong-soo [email protected]