The prospect of the memory semiconductor market that Samsung Electronics sees as ‘very very careful review’ is

[MK위클리반도체] Samsung Electronics held a conference call to announce its 3Q earnings on the 28th. Amid the continuing high-stakes theory of memory semiconductors, interest is focused on what kind of message Samsung Electronics will deliver. In response to analysts’ questions about the outlook for next year, Samsung Electronics cautioned that the market’s concerns were excessive, although “there is a lot of uncertainty.”

Samsung Electronics recorded 73.98 trillion won in sales and 15.82 trillion won in operating profit in the third quarter. It was the highest quarterly sales on record and the second-highest operating profit ever. The operating profit margin also recorded 21.4%, an improvement of 1.6 percentage points from the previous quarter.

In the third quarter, the memory semiconductor business also led Samsung Electronics’ earnings. In particular, Samsung Electronics said that it recorded the highest quarterly DRAM shipments in history as demand for DRAM semiconductors for servers increased significantly.

Samsung Electronics’ sales in the semiconductor sector in the third quarter amounted to 26.41 trillion won. Operating profit was 10.06 trillion won. This is the highest quarterly sales since 2018 when the semiconductor supercycle ended, and it is the first time since the third quarter of 2018 that an operating profit of more than 10 trillion won was recorded. Compared to the previous quarter, sales and operating profit increased by 16.1% and 44.9%, respectively.

As the demand for information technology (IT) products, which has been booming due to the recent Corona 19 crisis, is shrinking, issues in the global parts supply chain are also occurring, increasing uncertainty in the memory semiconductor market. In this situation, Samsung Electronics’ memory semiconductor business continued to grow in the third quarter, centering on server products. Samsung Electronics explained that while server products led the demand, in the mobile DRAM business, which had production setbacks due to parts supply issues, demand recovered as major finished product makers launched new products.

However, despite such good results, market anxiety about the memory market continues. Even after the announcement of the day’s earnings, the share price of Samsung Electronics remained in the low 70,000 range without much change.

The cause of this concern is the view that ‘pent-up demand’, which led demand in the first half of the year, is weakening as the ‘with corona’ system is established in major countries. In addition, uncertainties in the supply and demand of parts due to supply chain issues and uncertainties in demand from customers who manufacture finished products are also factors that darken the business outlook.

In the past, the memory semiconductor market had a price cycle that continued for about two years. However, the outlook for the memory semiconductor market, which had been rosy until the first half of this year, has recently reversed rapidly. In less than a year, the price of memory semiconductors turns flat, and there is even an observation that it will become a supercycle in the shortest time ever.

In particular, some market research institutes are even raising expectations that DRAM prices will drop by up to 20% next year. TrendForce also predicted in a recent report that the average selling price (ASP) of the DRAM market next year will drop by 15% to 20% more than this year.

Samsung Electronics also said on the same day, “Uncertainty about next year’s memory market situation is very high due to macro factors such as the impact of daily recovery from Corona 19, parts supply and demand and raw material price rise.” said. He added, “The difficulty of price negotiations is increasing because there is a time difference in the prospects of the memory semiconductor market for each customer.

As such, when Samsung Electronics took a rather conservative stance on the outlook for the semiconductor business next year, additional inquiries from analysts followed. In the Q&A session of the conference call, analysts from domestic and foreign securities companies poured out various questions about the semiconductor market. Considering the recent market conditions and prospects for memory semiconductors, UBS asked if there are plans to adjust investment plans for DRAM and NAND flash next year. In this regard, Samsung Electronics reiterated its previous position that there is great uncertainty, but repeatedly emphasized that “the size and direction of the investment will be decided based on an internally ‘very, very’ careful review.” He also said, “The management plan for next year has not been finalized yet, so it is difficult to suggest a direction for next year’s facility investment.”

However, on this day, Samsung Electronics did not just give such a passive answer. They also expressed the view that concerns about the memory semiconductor market are excessive. It is also predicted that the decline cycle will be shorter than when the industry fell sharply after the boom in 2018, and that it will return to recovery in the second half of next year.

When asked by HSBC about the risk and opportunity factors for memory semiconductor demand next year, Samsung Electronics said, “The cycle and range of fluctuations in the memory cycle have decreased compared to the past.” he emphasized.

In response, KB Securities asked what is the basis for believing that the memory cycle will no longer be the same as in the past. In response, Samsung Electronics also suggested three reasons for the decrease in the fluctuation range and period of the memory cycle. First, as the memory semiconductor applications, which were centered on PCs in the past, expanded to various fields, the portfolio diversified and the possibility of economic fluctuations decreased. It is explained that as the memory semiconductor process itself is refined and the difficulty increases, it is difficult to achieve a rapid increase in production unlike in the past. In fact, it is based on the fact that the current inventory level of memory semiconductor suppliers is maintained at a low level compared to the previous quarter. In addition, he added that there will be no sudden market fluctuations as in the past, as both consumers and suppliers learned the need to secure overall market soundness after experiencing a severe oversupply after the boom in 2018.

Meanwhile, Samsung Electronics also announced plans to actively invest in non-memory sectors such as foundries. Samsung Electronics explained, “The development of the 3-nano foundry process is in progress with the goal of the first half of next year. “We are planning an unprecedented investment to meet customer demand as much as possible,” he said. .

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