![Samsung can’t avoid the “inventory crisis”… Semiconductor deficit crisis after 10 years [위클리반도체]](https://wimg.mk.co.kr/news/cms/202212/30/news-p.v1.20221230.07c157a6622840749068096b77e38cde.png "Samsung can’t avoid the “inventory crisis”… Semiconductor deficit crisis after 10 years [위클리반도체]")
While major memory semiconductor companies such as SK Hynix and Micron have cut production, inventories have been found to still be rising. Analysts say this is because demand for semiconductors used in servers, PCs and smartphones is declining faster than the rate of production cuts by companies. Contrary to the initial expectation that the semiconductor industry will recover in the first half of next year, the industry outlook is that it will be difficult until the second half of next year.
According to market research firm Trend Force and the securities industry, as of the beginning of the fourth quarter of this year, the DRAM inventory days of Samsung Electronics, SK Hynix and Micron each counted as 15 weeks. The number of inventory days, which was only 6-7 weeks through the first quarter of this year, has more than doubled. Notably, the securities industry believes that SK Hynix’s inventory days will increase to 39.5 weeks as of the end of this year. Nam Dae-jong, a researcher at eBest Investment & Securities, said: “If you look at the inventory level of SK Hynix, next year it will be able to trade on inventory alone.”
According to the “November Industrial Activity Trend” announced by the National Bureau of Statistics, semiconductor production decreased significantly to 11.0%. Semiconductors recorded the largest decline in three months since last August (-12.8%). As the global economy slows and demand for information technology (IT) slows, semiconductor manufacturing is also accelerating the decline. The average manufacturing utilization rate, which refers to performance over capacity, was 73.1%, up 0.6 percentage points (p) from the previous month, but semiconductors (-20.3% ), telecommunications and broadcasting equipment (-26.9%) and electrical equipment (-9.2%) All down by 2.4% compared to the previous month.
As the export economy does not recover, the manufacturing industry is also struggling. The stagnation of exports can be measured by the rate at which inventories are building up, and manufacturing inventories increased by 1.4% from the previous month. The inventory-to-shipment ratio was 127.6%, up 4.8 percentage points (p) from the prior month. Inventories increased 6.2% while shipments decreased 3.8%.
The problem is that as inventories build up, semiconductor company prices fall, and this continues a vicious cycle that affects profits. According to Samsung Securities, as of the fourth quarter of this year, DRAM prices are estimated to drop 42% compared to the same period last year. In the second quarter of next year, it is even expected to be halved compared to the same period last year. Hwang Min-seong, a researcher at Samsung Securities, said, “There is a high possibility that the inventory will not decrease next year, but rather increase,” adding, “We need to actively cut production.”
Due to this influence, there is even a possibility that Samsung Electronics may experience a shortfall in the market.
In a recent report, Daishin Securities forecast operating profit of Samsung Electronics’ semiconductor division at a loss of 69.5 billion won in the first quarter and a loss of 67.4 billion won in the second quarter. The last time Samsung Electronics’ semiconductor division reported an operating loss was in the first quarter of 2009 (loss of 705.2 billion won).
Wi Min-bok, analyst at Daishin Securities, said, “Despite Samsung Electronics’ cost competitiveness in the industry, starting with a NAND flash operating loss in the fourth quarter of this year, losses in the DS division in the first quarter of this next year and DRAM losses are expected in the second quarter.”
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