"Memory Q2 Decline Narrows, Price Rebound Expected in Second Half"

Samsung Semiconductor Production Cut Effects to Fully Materialize in the Second Half of the Year

Samsung Electronics officially announced production cuts along with an 'earnings shock' report showing a 96% drop in operating profit for the first quarter of this year, raising expectations for a rebound in memory semiconductor prices in the second half.

On the 10th, the semiconductor industry is focusing on whether Samsung Electronics' official confirmation of production cuts, stating that "memory production is being reduced to a meaningful level," will lead to a market turnaround accompanied by price rebounds. The memory semiconductor market is dominated by the top three companies?Samsung Electronics (45.1%), SK Hynix (27.7%), and Micron (23.0%)?all of which have joined in production cuts. Due to semiconductor demand in the first quarter being weaker than expected, industry analysts believe that Samsung Electronics found it difficult to maintain its previous stance of "no artificial production cuts."

If Samsung Electronics had not cut production, memory semiconductor prices would have continued to fall, but expectations are growing that the scale of the current cuts will affect the extent of price declines in the second and third quarters. Generally, the effects of production cuts appear about three months after they begin, so following SK Hynix and Micron, which started cuts last year, Samsung Electronics' recent participation raises hopes that the effects of production cuts will fully materialize in the memory semiconductor market from the second half onward. Kim Un-ho, a semiconductor industry researcher at IBK Investment & Securities, said, "There is hope that the memory semiconductor oversupply situation could be resolved faster than previously forecasted," adding, "While a DRAM price rebound is unlikely immediately, the rate of decline could slow from the second quarter, and supply adjustments in the second half are expected to help balance supply and demand."

However, simply reducing supply alone is unlikely to improve the market; demand must support a price rebound. Currently, memory demand outlook is uncertain due to concerns about an economic downturn in the server industry and a slowdown in e-commerce. The smartphone and PC markets are also saturated. Park Yoo-ak, a researcher at Kiwoom Securities, explained, "The existing DRAM inventory must be depleted first, and an absolute period is needed for demand to absorb the restarting of factories that had undergone production cuts."

Even if the semiconductor market recovers, the US-China conflict remains a burden for Korean semiconductor companies. Due to geopolitical risks stemming from US-China tensions, concerns are rising that Samsung Electronics and SK Hynix, which operate factories in China, may not fully benefit from a recovery in Chinese demand. Kim Sun-woo, a researcher at Meritz Securities, analyzed, "The US is likely to strictly limit reinvestment to within US territory and prohibit additional investments in China," adding, "Domestic companies already operating production facilities in China must consider not only maintaining the status quo but also exit strategies."

Meanwhile, Samsung Electronics' consolidated operating profit (provisional) for the first quarter of this year was 600 billion KRW, a 95.75% decrease compared to the same period last year. This is the first time in 14 years since the first quarter of 2009 (590 billion KRW) that quarterly operating profit has fallen below the 1 trillion KRW mark. The biggest cause of the earnings decline is the slowdown in semiconductor demand. The DS division, responsible for semiconductors, is estimated to have posted a loss of around 4 trillion KRW.

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