Downward Spiral
The global semiconductor market is on a downward spiral. In particular, its demand in North America, one of the largest semiconductor markets, has rapidly decreased. Samsung Electronics and SK Hynix expect that they will have the most difficult year in the coming four to five years, focusing on cost reductions.
According to the data from the Semiconductor Industry Association (SIA) on March 9, the worldwide sales of semiconductors reached US$26.9 billion (32.71 trillion won) for the month of January 2016, down 5.8% down from a year earlier. Sales in North America were particularly sluggish, decreasing 16.9 percent year-to-year. This was largely due to the business reorganization from large M&As of semiconductor companies as well as weak overall demand.
By region, sales in most regions, except for China, declined – Europe by 7.7 percent, Japan 5.1 percent and Asia Pacific by 6.5 percent from a year ago. On the other hand, sales of China went up by 4.3 percent from the previous year.
Such a downturn in the semiconductor market was already expected last year. The price of memory chips remained at the same level due to sluggish demand, and the mobile device market showed a slow growth. The Internet of Things (IoT) and automotive semiconductor chips, which are considered the next-generation growth engines, still take up less than 20 percent in the overall market.
Therefore, domestic semiconductor companies have growing concerns about the business showings. Notably, the memory semiconductor market is expected to see a minus 3 percent growth this year, showing a minus 1 percent growth last year.
Samsung Electronics and SK Hynix are conservatively operating their facility investments as much as possible and focusing on R&D to dominate the next-generation market in advance this year. Samsung Electronics’ Device Solutions (DS) Division has postponed this year’s investment in expanding facilities to next year. Except for ongoing investments, including the Pyeongtaek plant, the company has no additional plans for investment. SK Hynix will spend the about the same amount of 6 trillion won (US$ 4.94 billion) in overall facility investment compared to last year, and is making every effort to reduce other expenses.