As per the industry recent report, Samsung Electronics is conducting an internal meeting in order to contemplate the level of production cuts. Inside the system, it is known that there is a division between the position that manufacturing should be cut. This is by considering the situation of the semiconductor business which is more intense than expected.
Also the current stock price, and widening the gap with rivals, the decision made for the sake of the company’s future value. Noticeably, in the conference call of the fourth quarter of the previous year, with respect to market predictions that making would be concise.
“This year’s facility investment (Capex· CAPEX) will be at a level similar to the previous year,” he said, reaffirming his previous position that “there is no artificial production cut.”
Although, at the same time, it gives space for “natural production reduction” via a production line amendment. It comprises facility relocation and micro-process conversion. Also, the market assumes that natural production cut short of approx 20% is already taken into action.
Do Hyun-woo, a researcher at NH Investment & Securities, said, “According to some test and component companies, orders received from Samsung Electronics in the first quarter decreased by more than 1%,” and predicted, “Samsung Electronics’ current DRAM inventory is higher than 30 weeks compared to competitors, and it will expand the level of production cuts to overcome this situation.”
As per the business report 2022, presented by Samsung Electronics. The inventory of the DS division is responsible for the semiconductors hike of the figure 2021.16% from 29.576 trillion won at the end of 76 to 6.12 trillion won at the end of last year respectively.
Samsung Electronics may showcase a sign of production cuts earlier
The whole sole issue is the condition of the semiconductor industry. Since it become worse than expected in January this year. Subsequently, the Sales are forecasted to fall by 17.34% to 64.2 trillion won.
Kim Rok-ho, a researcher at Hana Securities, said, “Inventories may have increased in the first quarter as shipments continue to be sluggish while Samsung Electronics’ DRAM production has not decreased.”
Vice Chairman Park said, “Three people (Samsung Electronics· With SK hynix and Micron’s general-purpose products, customers are playing, and if they continue to play, they will go through a process of rapidly lowering prices in terms of oversupply in a downcycle.”
In addition to this info, the nature of memory semiconductors the prices can increase if supply is more than demand. As per Taiwanese market research firm Trendforce. The average selling price of DRAM dropped by 1% in the first quarter.
“The price decline is expected to slow to 2-10% in the second quarter,” Trendforce said, adding, “DRAM ASP continues to fall due to high supplier inventory levels, and prices can only rebound if production is significantly reduced.”
Thus, there is a prediction that Samsung Electronics will showcase a sign of production cuts. The same is one step further than before.
Kim Woon-ho, a researcher at IBK Investment & Securities, said, “The most necessary variable at this point is supply strategy, and although it is too late, we believe that there is sufficient consensus on negative production bit growth (production growth rate in bits).”
On the other hand, SK Hynix also takes the charges whereby there will be no additional production cuts. Apart from the earlier announced production reduction plan.
“Even if production cuts are carried out, DDR4 inventories already in place will not decrease before demand recovers, and DRAM will still have time to reach cash costs even if inventory valuation losses are taken into account,” said Chae Min-suk, a researcher at Korea Investment & Securities.
According to data from Yonhap Infomax Co., a financial news and data providing company in Korea, Samsung Electronics’ first-quarter operating profit this year is expected to plunge 94.9 percent to 720.1 billion won and sales to fall 17.34 percent to 64.3 billion won.
“Samsung Electronics’ DRAM Inventory would have increased further in the first quarter as its shipments continued to be sluggish and no production cut,” said Kim Rok-ho, an analyst at Hana Financial Investment Co. “It is time to think about conservative production capability management policies.”
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