Memory costs to weigh on revenue

Memory prices to weigh on profit

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Samsung has actually dealt with pressure from plunging memory costs which has actually affected its essential revenue driving DRAM and NAND service.

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Samsung’s revenue might nosedive when it reports fourth-quarter incomes assistance today as costs for essential memory chips continue to plunge in the middle of weak need.

Analysts anticipate Samsung to report 7.18 trillion South Korean won ($ 5.64 billion) in operating revenue in the December quarter, according to Refinitiv agreement quotes. That would be a near 50% fall versus the 4th quarter of 2021.

However, some experts are more bearish than the agreement.

Analysts at Macquarie Research projection Samsung to report fourth-quarter operating revenue of 5.5 trillion won, which would be the most affordable given that the 3rd quarter of2016 Daiwa Capital Markets experts see running revenue at 4.9 trillion won, a 65% year-on-year plunge and would be the most affordable given that the 4th quarter of 2015.

The pessimism comes from a fast fall in memory costs. Samsung is the world’s greatest gamer in so-called NAND and DRAM chips which are utilized in gadgets such as laptop computers and mobile phones, through to information centers.

NAND and DRAM costs fell dramatically in the 4th quarter due to an absence of need for the items they ultimately enter into, such as PCs. This has actually resulted in electronic devices makers and other business that utilize such chips keeping their stock, additional decreasing need for Samsung’s chips.

Samsung is not exempt from the “memory market carnage,” Macquarie experts stated in a note released Tuesday.

“The magnitude and speed of the memory price decline is parallel to the global financial crisis in 2008,” Macquarie stated.

“A toxic combination of an end demand slump and excessive channel inventory led to a high inventory level not seen in a decade,” it included.

The experts stated they anticipate Samsung’s NAND service to be loss making in the 4th quarter while DRAM is “likely to have a razor thin profit margin” in the very first half of 2023.

Samsung’s semiconductor service, that includes NAND and DRAM, represents almost 50% of the business’s operating revenue. Therefore, any hit to the memory department will have a huge influence on the total revenue the business reports.

Analysts likewise anticipate weak point in other parts of Samsung’s service consisting of mobile phones, which might weigh on incomes.

Samsung will launch fourth-quarter incomes and profits assistance on Friday prior to its complete monetary report, likely later on this month.

Recovery ahead?

Analysts at Macquarie and Daiwa believe the very first half of the year will be difficult for Samsung due to ongoing pressure on memory costs.

But incomes might bottom in the 2nd quarter of 2023, according to Refinitiv agreement quotes.

Daiwa experts stated there will be a rebound in incomes in the 2nd half of 2023 “along with an improving memory cycle and recovery in mobile demand.”

Macquarie experts stated a decline in memory costs “tends to provide an opportunity for the memory leader came back stronger in a new cycle.”

“History has also shown that investors should not wait until the cyclical turnaround has already begun. For these reasons, we recommend investors hold onto SEC (Samsung Electronics), despite the negative near-term news.”