Semiconductor, Electronics, and Components Industries Facing Hardships... Reducing Investments and Closing Businesses

Q&A Flooded in the Conference Call on Crisis Response Strategies for the Second Half of the Year

[Asia Economy reporters Sunmi Park and Hyunseok Yoo] In the Q2 earnings conference calls held by major domestic semiconductor, electronics, and component companies, concerns about external uncertainties in the second half of the year outweighed praise for record-breaking performance. Despite achieving results comparable to the semiconductor super boom of 2018, the prevailing sense of crisis is interpreted as reflecting the view that the 'super cycle' has effectively ended. The prolonged Russia-Ukraine war, inflation, and recession fears due to interest rate hikes are also factors darkening the semiconductor market outlook for the second half.

Companies announced revisions to their management strategies for the second half, preparing for simultaneous declines in IT product demand and rises in raw material prices. As a countermeasure to the gloomy market, they are considering reducing investment plans and restructuring unprofitable businesses.

According to the industry on the 30th, Samsung Electronics and SK Hynix stated in their Q2 conference calls that they expect memory semiconductor demand to slow in the second half and plan to operate investments and inventory flexibly. Jinman Han, Vice President of Samsung Electronics Memory Division, said, "Given the high market uncertainty, we prioritize flexible supply using inventory and believe short-term facility investments should be flexibly reviewed accordingly."

SK Hynix President Jongwon Noh also said, "The invested volume is fixed, and as the targeted shipment volume decreases, inventory will increase. As inventory levels rise, various considerations regarding capital expenditures, including next year's facility investments, are underway. Significant adjustments are inevitable."

The electronics and component industries, recognizing the slowdown in consumer sentiment in the second half, have prepared countermeasures such as strengthening premium product targeting with high product loyalty and reorganizing portfolios toward more profitable product groups.

Seonggu Kim, Executive Director of Samsung Electronics MX (Mobile) Division, said in the conference call, "Based on global partnerships, we plan to generate sales exceeding Galaxy Note to popularize foldable phones in earnest," expressing the intention to solidify the leading position in the global foldable phone market. In the home appliance sector, where profit decline due to cost burdens is inevitable, they plan to expand premium product sales and focus on improving profitability through strengthening B2B and online channels and cost reduction.

Component companies such as Samsung Electro-Mechanics and LG Innotek, which posted better Q2 results than set manufacturers, also plan to expand their semiconductor substrate and automotive parts market strategies to reduce performance volatility in the second half.

Samsung Electro-Mechanics stated that for the multilayer ceramic capacitor (MLCC) sector, which is expected to see significant sales growth this year, "We plan to focus on securing automotive customers, expanding lineups, and targeting the high-growth electric vehicle and ADAS fields." Regarding the high-spec server package substrate with strong growth potential, they added, "We are concentrating capabilities to achieve initial mass production in the second half. After initial mass production, we will expand production capacity next year to contribute to sales starting in 2024."

The display industry is planning to drastically reduce the LCD business, where product prices are expected to continue falling in the second half, and focus on high value-added OLED products.

Choi Kwon-young, Vice President of Samsung Display, said, "We began withdrawing from the LCD business years ago after analyzing market changes and consumer demand, and completely ended the business in the first half of this year. We will build a foundation for a new leap forward by establishing a full lineup of OLED products." Heeyeon Kim, Head of LG Display's Management Strategy Group, also stated in the conference call, "We judge that differentiating competitiveness in the LCD business will be difficult going forward and plan to reduce the business by the first half of next year."

This content was produced with the assistance of AI translation services.