Excessive Inventory
Samsung Electronics and SK hynix, two major players in the Korean semiconductor industry, are expected to post operating losses of more than 3 trillion won each in the first quarter of this year, indicating that the semiconductor industry’s slump is deeper than expected.
According to industry sources on March 19, analysts at securities firms said that Samsung Electronics and SK hynix will post operating losses of more than 3 trillion won each in the first quarter of this year.
Eugene Investment & Securities recently predicted that Samsung Electronics’ DS Business Division in charge of semiconductors will post a 3.7 trillion won (US$2.8 billion) operating loss. In the memory sector, its deficit is expected to widen significantly as inventory valuation losses begin to be reflected in sluggish bit growth and a decline in average selling prices. The company is expected to announce poor performances in the nonmemory sector as well due to lower foundry utilization rates and the deteriorating profitability of branded products.
SK hynix is also expected to post an operating loss of more than three trillion won in the first quarter. BNK Investment & Securities expects SK hynix to post an operating loss of 3.32 trillion won (US$2.5 billion) in the first quarter of this year, which could increase depending on the size of inventory valuation losses.
“The biggest problem facing the Korean semiconductor industry right now is their large semiconductor inventory. In order to reduce it, they need to cut down on production and inventory valuation losses need to be reflected,” said an analyst at Eugene Investment & Securities. “If that happens, cost per chip is likely to increase further due to higher fixed costs.”