Samsung Electronics Posts 4.58 Trillion KRW Semiconductor Loss in Q1... Seeking Escape with Record R&D Investment (Comprehensive)

Samsung Electronics posted a loss of 4.58 trillion KRW in its semiconductor division in the first quarter of this year alone. This was due to a decline in demand for its main product, memory semiconductors, as well as a drop in the operating rate of its growth engine, foundry (semiconductor contract manufacturing). However, the company carried out the largest-ever scale of facility investment and research and development (R&D) in the first quarter, expecting a gradual recovery in the business environment with a global demand rebound in the second half of the year.

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On the 27th, Samsung Electronics announced its first-quarter results with consolidated sales of 63.75 trillion KRW and an operating profit of 640 billion KRW. Sales decreased by 9.5% compared to the fourth quarter of last year and by 18.05% compared to the first quarter of last year, as IT product and home appliance purchasing sentiment weakened amid global economic uncertainties and concerns over economic slowdown. Operating profit was limited to 640 billion KRW due to semiconductor division losses exceeding 4 trillion KRW.

Samsung Electronics’ first-quarter operating profit shrank by 85.13% compared to the previous quarter and by 95.47% year-on-year. There was also foreign exchange loss. The first quarter saw the Korean won strengthen against the dollar, euro, and emerging market currencies. This had a negative impact of about 700 billion KRW, mainly on semiconductors, which are export-focused.

It was the first operating loss in the semiconductor division in 14 years since the first quarter of 2009 (7.1 trillion KRW operating loss). The scale of the loss is the largest ever. Both DRAM and NAND memory semiconductors experienced weak demand due to high customer inventory. Nevertheless, NAND was able to maintain a bit growth (production increase rate converted to bit units) slightly above market expectations by actively responding to demand for high-capacity products despite weak demand in servers and storage. Foundry demand shrank due to the global economic downturn, and customers with accumulated inventory reduced orders, leading to a decline in performance.

On the other hand, the Device eXperience (DX) division, which includes mobile and home appliances, recorded sales of 46.22 trillion KRW and an operating profit of 4.21 trillion KRW. In particular, the mobile business performed well despite the market contraction where smartphones were not selling well. Sales increased compared to the previous quarter due to strong sales of the Galaxy S23 series, and profitability recovered to double digits. Additionally, operational efficiency improvements in the process led to significant operating profit improvements across flagship, A series, and tablets, contributing to the results.

The Visual Display division improved profitability by focusing on premium TV sales and reducing operating costs amid a sluggish TV market due to seasonal factors and the global economic downturn. Despite continued weak demand and cost burdens, the home appliance business maintained performance at the previous quarter’s level. The DX division plans to secure stable profitability this year by focusing on the premium market, expanding sales of foldable phones and new TV models.

The Display division recorded sales of 6.61 trillion KRW and an operating profit of 780 billion KRW. Although the small- and medium-sized panel market shrank, resulting in poor performance, the expansion of foldable models and strong flagship sales helped maintain market leadership in the premium segment. The large panel segment reduced losses through the launch of new QD-OLED products.

Samsung Electronics’ bold facility investment and R&D spending in the first quarter, when the semiconductor market was at its worst, to strengthen future preparedness is noteworthy. R&D expenses reached 6.58 trillion KRW, the largest ever. Facility investment also hit a record high for the first quarter at 10.7 trillion KRW.

In particular, 9.8 trillion KRW was poured into semiconductors. For memory, mid- to long-term supply stability was pursued through the completion of the third phase of the Pyeongtaek plant and infrastructure investment for the fourth phase to meet advanced process demand. Foundry investments focused on the Texas Taylor and Pyeongtaek plants in the U.S. to respond to advanced process demand. Samsung Electronics plans to continuously expand the proportion of infrastructure and R&D investments to secure mid- to long-term competitiveness.

Samsung Electronics expects the overall weak demand situation to continue in the second quarter but anticipates a gradual recovery in the business environment amid a global demand rebound in the second half. For memory semiconductors, the company plans to accelerate the transition to advanced processes while responding to demand for high-value-added products such as DDR5 and LPDDR5x. For foundry, it aims to expand new customer orders based on the stable development of the second-generation 3nm process applying gate-all-around (GAA) technology and to proceed smoothly with the development of next-generation 2nm technology.

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