The authors are analysts of Shinhan Funding Corp. They are often reached at email@example.com and firstname.lastname@example.org, respectively. – Ed.
3Q22 working revenue estimated at KRW11.3tr (-19.9% QoQ)
Samsung Electronics is predicted to have posted working revenue of KRW11.3tr (-19.9% QoQ) on gross sales of KRW77.3tr (+0.1% QoQ) for 3Q22, falling in need of lowered market expectations (KRW12.1tr). Consensus projections for 2023 could decline even additional in view of falling reminiscence chip costs and slowing gross sales of tech merchandise amid the macroeconomic downturn.
By division, working revenue from semiconductors ought to have are available in at KRW6.0tr (-39.8% QoQ), cell expertise KRW3.0tr (+13.6% QoQ), shows KRW1.9tr (+78.8% QoQ), and shopper electronics KRW0.3tr (-13.8% QoQ).
Unprecedented provide cutbacks anticipated on a steep decline in tech product demand
Demand for tech merchandise like smartphones, PCs, and TVs is declining at a quick tempo as a result of speedy macroeconomic deterioration. The decline in chip orders is even sooner, which seems to be largely due to the stock burden at purchasers. Inventories have constructed as much as report excessive ranges through the three-year-long up-cycle. The prolonged up-cycle will take a toll.
Confronted with weakening demand, reminiscence makers plan to make use of their oligopolistic place and aggressively reduce provide. Micron Know-how introduced within the latest earnings name that capex spend will probably be reduce by 50% in FY2023 and capability utilization by about 5% on the yr’s finish and early 2023. Kioxia additionally determined to scale back its NAND output by 30% from October.
Give attention to reminiscence manufacturing cutbacks relatively than demand
Within the earlier down-cycle, the earnings shock got here with order cuts made in 4Q18 after earnings peaked in 3Q18. This led the share worth to tumble. Shares examined lows in 4Q18 and recorded the primary backside with a short-term rebound in 1Q19. It was fairly quick contemplating that DRAM contract costs went up in 1Q20 (share worth rally began in 3Q19 after the second backside). We are able to clarify the short-term rebound seen in 1Q19 with capex cutbacks (provide discount). The scenario in 4Q22 will doubtless be just like that of 1Q19. We consider provide cutbacks will probably be cause sufficient for the chipmaker’s share worth to outperform the KOSPI.