Samsung Shares rose on Thursday, pulling up Asian chip makers after South Korean tech giants released “better than fear” earnings guidance in the second quarter.
Analysts warned that weak demand may not yet be fully advanced, but the numbers raise investor concerns about rising inflation, worsening consumer demand and rising material costs for semiconductor companies. Softened.
This year, chipstock was hit in the midst of concerns, including supply chain disruptions, the Russian-Ukraine war, soaring material costs, and a surge in inflation that threatened consumer demand for products such as smartphones.A few days before Samsung’s earnings guidance, U.S. chip maker Micron warned: Softening demand for consumer products..
That was the background of Samsung’s results.
However, Samsung said it expects second-quarter sales to rise 22% year-on-year to 77.78 trillion won ($ 59.8 billion), after which it rose more than 3% on Thursday. Operating profit is expected to increase by about 12% to 14.12 trillion won, which is the slowest growth in more than two years and disappoints.
However, the result was “better than afraid,” said SK Kim, an analyst at Daiwa Capital Markets, on CNBC.Street sign asia“On Thursday.
Samsung’s earnings guidance brought a recovery on other Asian semiconductor stocks on Thursday. Taiwan TSMCOne of the largest chip makers in the world, with a 5% increase in rivals. United Microelectronics Corporation It increased by more than 7%.Korean SK Hynix It was almost 2% higher.
“It’s like relieving investors’ oversold tech stocks and pre-results,” Dale Gai, research director at Counterpoint Research, told CNBC in an email.
Samsung did not disclose a breakdown of the results for each business segment. It will come later this month. However, its component business accounts for nearly 60% of total operating profit and consists of chips used in products ranging from data center servers to smartphones and laptops. Samsung also designs and manufactures semiconductors.
CLSA analyst Sanjeev Rana told CNBC that Samsung’s semiconductor business is expected to increase profits by 19% quarter-on-quarter. Lana said Samsung’s improved product mix between so-called memory chips and the appreciation of the US dollar are likely to have helped the tech giant. Samsung’s chip sales are mainly in US dollars, but they are reporting profits in Korean won.
According to Daiwa’s Kim, memory chip shipments are likely to decline, but the company’s design and casting business may have achieved a “double-digit operating margin” in the second quarter, chip division. Contributed to the expansion of. Foundries are chip manufacturing services that allow one company to design and manufacture semiconductors from another company. TSMC is the largest foundry in the world.
The decline in smartphones and TVs is expected to hinder the company’s performance.
Despite Samsung’s second-quarter chip strength, analysts expect short-term headwinds.
“Technology companies have seen a significant deterioration in demand only since the second quarter of last month, and the slump in demand is not yet on track,” Lana said in an email.
Meanwhile, according to Counterpoint Research’s Dai, “chip inventories have reached very high levels.” High semiconductor inventory levels suggest weaker demand, which can also increase supply and put pressure on prices.
However, Lana said some of the oversupply problems could be mitigated.
“(A) Much of the bad news is in prices, and for stocks like Samsung and Hynix, investors bet that both companies may also announce memory production and capital investment cuts with just Micron announced last week. It seems to be, “Lana said.
Samsung’s share price has fallen about 25% this year, while SK Hynix has fallen 28%.
Meanwhile, Samsung is lagging behind in securing production equipment and semiconductors, which could slow down memory chip production, Lana added.
Given these factors, Samsung’s strategy to increase inventory of certain chips is “correct,” and the market may underestimate the challenges Samsung faces in the production of memory chips in 2023. Added.