Samsung does not indicate Capex cut in chip business

Samsung Electronics said its supply of memory chips will grow faster than its rivals and its investments will proceed as planned.
Samsung revenue by segmentSamsung did not reveal its Capex plan for the next year.

Samsung indicates that it aims to use a sudden downturn in worldwide tech demand to consolidate its dominance in the memory chips business and catch up with rival TSMC in contract chip manufacturing, analysts said.

“We are not considering an artificial production cut,” Han Jin-man, executive vice president of memory business at Samsung, told analysts after posting a 31 percent plunge in quarterly profit.

“Market demand has contracted right now, but … we need to prepare for mid- to long-term demand recovery.”

Samsung said it did not expect much change to its 2023 memory chip investment plans. In contrast, SK Hynix on Wednesday warned of an unprecedented deterioration in memory chip demand and slashed 2023 investment by more than 50 percent.

Earlier this month, TSMC cut its annual investment budget by at least 10 percent for 2022 and struck a more cautious note than usual on upcoming demand.

Samsung plans to invest 54 trillion won this year, of which 47.7 trillion won ($34 billion) is earmarked for its components business, mainly semiconductors.

Samsung said uncertainties were likely to dampen demand for semiconductors until early 2023. For NAND flash chips, Samsung forecast the market may not recover in 2023.

Samsung said it would boost shipments of memory chips at a faster rate than its peers across the industry. Samsung does not publish specific details of its supply plans.

In the contract chip business, where Samsung is a distant No.2 behind TSMC, it expected record sales and operating profit this year.

“Samsung seems to be saying it will use this downcycle to push out other NAND flash firms like SK Hynix and Kioxia,” said Park Sung-soon, analyst at Cape Investment & Securities.

Samsung is expected to keep capital expenditure cuts to a minimum in 2023 versus 2022 – at about 5 percent for memory chips – to continue its migration into more advanced manufacturing, which will initially curtail supplies of certain chips due to new production process, said Daishin Securities analyst Wi Min-bok.

This differs from rivals SK Hynix or Micron Technology’s plan to potentially cut investment by more than 30 percent next year.

Samsung’s operating profit fell to 10.85 trillion won ($7.7 billion) for the July-September quarter, from 15.8 trillion won a year earlier, the first year-on-year decline in nearly three years as its chip business profit fell to 5.12 trillion won from 10.07 trillion won a year earlier.

Samsung said profit in its mobile business fell slightly to 3.24 trillion won from 3.36 trillion won a year earlier, Reuters news report said.