Is Samsung Electronics Not at the Bottom Yet?

"2023 Semiconductor Market Down 3.7% YoY"
Samsung Electronics Earnings Outlook Downward
Possibility of Market Share Expansion During Semiconductor Slump

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Samsung Electronics' earnings outlook is bleak due to the semiconductor downturn next year. For the time being, Samsung Electronics' stock price is also expected to find it difficult to break out of the '60,000 won range.' However, once the market hits bottom, Samsung Electronics' market share is expected to expand by taking advantage of competitors' reduced investments.

According to Hyundai Motor Securities on the 24th, the semiconductor market size in 2023 is expected to decrease by 3.7% year-on-year to $520 billion. This is because semiconductor demand is also expected to decline due to the economic slowdown. The memory semiconductor market is expected to record $132.5 billion, down 11.9%, as oversupply conditions persist until the first half of next year.

The semiconductor downturn also darkens Samsung Electronics' earnings outlook. According to the consensus compiled by financial information provider FnGuide, the estimated operating profit for Q4 this year is 8.3921 trillion won, down 39.48% from the previous year. For Q1 2023, it is estimated at 7.1494 trillion won (-49.37%), and for Q2 2023, 6.8563 trillion won (-51.36%). Sales are also expected to decline starting next year.

Lee Seung-woo, a researcher at Eugene Investment & Securities, forecasted, "In 2023, due to the global economic slowdown and the memory semiconductor downturn cycle, sales will be 283 trillion won (-8%) and operating profit 28.9 trillion won (-39%). Operating profit by division is estimated at 10.3 trillion won for semiconductors, 5.7 trillion won for displays, 10.3 trillion won for communications, 1.6 trillion won for home appliances, and 800 billion won for Harman."

Despite recent improved supply and demand, Samsung Electronics' stock price is expected to remain in a box range for the time being. Foreigners and institutions net purchased 1.5059 trillion won and 44.9 billion won respectively in October. This month, they net purchased 338.6 billion won and 452.4 billion won respectively. In particular, since foreigners switched from 'selling' to 'buying' in September, Samsung Electronics' stock price has risen but still remains in the '60,000 won range.'

Park Yoo-ak, a researcher at Kiwoom Securities, diagnosed, "In the case of DRAM, Samsung Electronics' intention to expand market share is reflected, and the market forecast is expected to go through a downward adjustment process, but the stock price is already pricing this in."

However, if the semiconductor industry hits bottom, Samsung Electronics' stock price is highly likely to rebound. This is because it can strengthen its market dominance by taking advantage of competitors reducing capital expenditures to cut losses. Earlier, Samsung Electronics stated in its Q3 earnings conference call that 'there will be no reduction in investments.'

No Geun-chang, a researcher at Hyundai Motor Securities, predicted, "In the memory semiconductor industry, where inventory is rapidly rising, production cuts and capital expenditure reductions are continuing mainly among second-tier and lower companies, leading to an increase in Samsung Electronics' market share. The DRAM and NAND market shares are expected to recover to 45.7% and 35.7% respectively on a value basis in 2024."

No said, "Typically, when DRAM equipment sales decrease by more than 30% compared to the previous quarter, DRAM prices have rebounded after 4 to 5 quarters. Therefore, DRAM prices are expected to rebound from Q2 next year." This implies that the semiconductor oversupply could be resolved as early as the second half of next year.

Park Yoo-ak of Kiwoom Securities added, "In the case of DRAM, Samsung Electronics' intention to expand market share is reflected, and the market forecast is expected to go through a downward adjustment process, but the stock price is already pricing this in. Going forward, the rebound in the memory semiconductor market and expectations of securing new foundry customers will drive further stock price increases."

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