Despite Consecutive Semiconductor Losses... Gartner Predicts 70% Surge in Memory Market Sales Next Year

Samsung Electronics Semiconductor Turns to Loss After 14 Years
SK Hynix Posts Trillion-Won Loss for Two Consecutive Quarters
Inventory Expected to Decrease in Q2 Due to Samsung's Production Cut Participation

Following SK Hynix, Samsung Electronics posted a loss in its semiconductor division for the first time in 14 years. Both companies anticipated that efforts to cut production in the memory industry could lead to a reduction in market inventory starting from the second quarter, signaling a potential recovery in the industry. However, it is expected to take some time before these effects are reflected in their financial results.

Samsung Electronics recorded an operating loss of 4.58 trillion KRW in its DS Division (semiconductors) for the first quarter. After a sharp decline from trillion-won operating profits in the fourth quarter of last year to billion-won levels, the company turned to a loss for the first time since the first quarter of 2009 (-710 billion KRW), marking the largest loss in its history. First-quarter sales plummeted 49% to 13.73 trillion KRW.

SK Hynix has been posting losses since the fourth quarter of last year. It recorded an operating loss of 3.4023 trillion KRW in the first quarter, with the deficit widening compared to the fourth quarter of last year (-1.8984 trillion KRW). The shrinking earnings of both companies are due to the sluggish semiconductor market. Since the second half of last year, the global economic downturn has led to a cycle of ‘decreased IT demand → oversupply → increased inventory → price drops → reduced earnings.’ Especially, both companies have been hit harder because their main focus is on the memory business, which is highly sensitive to economic conditions.

Samsung Electronics has initiated aggressive production cuts in memory. After announcing the loss on the 27th, the company explained that it is reducing production mainly of legacy (older) products that can respond to mid- to long-term demand.

The market expects that memory inventory will decrease as major memory players such as SK Hynix and US-based Micron, followed by industry leader Samsung Electronics, cut production. Samsung Electronics forecasted that inventory would start to decline from the second quarter, with a larger reduction expected in the second half of the year. SK Hynix also expects the effects of production cuts to become more apparent in the second quarter.

However, there is a time lag before the effects of production cuts are reflected in financial results. Negative growth is inevitable for the time being. The securities industry expects Samsung Electronics to record an operating loss in the 3 trillion KRW range in the DS Division for the second quarter. Some forecasts predict losses continuing into the third or fourth quarter. SK Hynix is also expected to continue posting losses through this year.

Samsung Electronics and SK Hynix plan to endure the memory semiconductor downturn by responding to mid- to long-term market demand. Samsung Electronics is focusing on Double Data Rate (DDR) 5, which is expected to see significant market growth this year. The company plans to accelerate the transition to advanced DDR5 process technology in the second half of the year. SK Hynix plans to reduce investments by more than 50% compared to last year (19 trillion KRW) but will continue investing in high-value-added products such as DDR5 and High Bandwidth Memory (HBM).

Along with these efforts by both companies, a full-scale industry recovery is expected next year. Market research firm Gartner forecasted that global semiconductor sales will decline by 11.2% to 532.2 billion USD this year compared to last year. However, it is optimistic that sales will increase by 18.5% to 630.9 billion USD next year. In particular, the memory market is expected to surge by 70% in sales, reaching 156.9 billion USD. Gartner explained, "In 2024, the market will shift to a supply shortage state, causing prices to rebound, with DRAM and NAND sales increasing by 86.8% and 60.7%, respectively."

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