April 27, 2023 — Samsung Electronics today reported financial results for the first quarter ended March 31, 2023. The Company posted KRW 63.75 trillion in consolidated revenue, a 10% decline from the previous quarter, as overall consumer spending slowed amid the uncertain global macroeconomic environment. Operating profit was KRW 0.64 trillion as the DS (Device Solutions) Division faced decreased demand, while profit in the DX (Device eXperience) Division increased.

The DS Division’s profit declined from the previous quarter due to weak demand in the Memory Business, a decline in utilization rates in the Foundry Business and continued weak demand and inventory adjustments from customers.

Samsung Display Corporation (SDC) saw earnings in the mobile panel business decline quarter-on-quarter amid a market contraction, while the large panel business slightly narrowed its losses.

The DX Division’s results improved on the back of strong sales of the premium Galaxy S23 series as well as an enhanced sales mix focusing on premium TVs.

The strength in the Korean won against the US dollar, euro and most major emerging currencies resulted in a negative impact of approximately KRW 0.7 trillion on company-wide operating profit, mostly in the component business.

In the second quarter, while current market conditions are expected to remain, the DS Division will focus on boosting technological competitiveness, including the gate-all-around (GAA) based 2-nanometer (nm) process, while meeting demand for DDR5, LPDDR5x and other high-end products.

SDC’s mobile panel business will focus on meeting demand projections for the second half of the year, while the large panel business is expected to see an increase in quarterly sales.

The DX Division aims to maintain solid profitability by expanding sales of the Galaxy A series smartphones and new TV models while also improving cost efficiency.

In the second half of the year, based on expectations of a gradual market recovery and a rebound in global demand, the DS Division will focus on high-capacity server and mobile products. The DS Division will continue to strengthen its technology leadership by expanding customers for leading-edge products based on the GAA process.

SDC’s mobile panel business is expected to continue leading the high-end market, while its large panel business will further expand in the premium market and improve profitability.

The DX Division plans to solidify its leadership in the premium segment, including foldable smartphones and Neo QLED screens. The DX Division also aims to increase market share by expanding collaboration with partners and will enhance profitability by continuing to improve operational efficiency.

The Company’s total capital expenditures in the first quarter stood at KRW 10.7 trillion, including KRW 9.8 trillion for semiconductors and KRW 0.3 trillion for displays. Spending on memory was concentrated on completing the P3 infrastructure and on the P4 framework in preparation for mid- to long-term supply. Foundry investments focused on fabs in Taylor, Texas and Pyeongtaek, Korea to address demand for advanced nodes, while investments in displays focused on infrastructure and module production enhancements.

Semiconductor Demand Expected to Gradually Recover in 2H

The DS Division posted KRW 13.73 trillion in consolidated revenue and KRW 4.58 trillion in operating losses for the first quarter.

The Memory Business’s performance fell significantly compared to the previous quarter, with ongoing inventory adjustments leading to a decrease in overall demand amid an economic slowdown and weakened customer spending.

For DRAM, demand was sluggish due to inventory adjustments by server customers, mainly hyperscalers, and purchasing delays and Set-Build reductions, with consumer demand for mobile and PC applications having not yet recovered. The Memory Business focused on selling high value-added products such as high-density mobile products and meeting server-use DDR5 demand in line with the adoption of new CPUs. While prices fell less than the market forecast, bit growth could not meet the previous guidance.

As for NAND, despite weak demand, the Memory Business actively responded to trends shifting toward high-density across overall applications, such as eStorage of 512GB and above for major mobile customers and client SSDs of 1TB and above for PC OEMs. As a result, our bit growth exceeded the previous guidance.

Looking ahead to the second quarter, as major hyperscalers invest more conservatively in servers and customers continue to adjust their inventories, limited demand recovery is expected.

For DRAM, the Memory Business will respond to increasing demand for DDR5 and high-density modules led by the launch of new CPUs for servers and increased demand for AI and will also actively respond to LPDDR5x demand for mobile high-end products such as new form factor smartphones.

For NAND, based on cost competitiveness, the Memory Business plans to actively address demand for high-density products across all applications while responding to customer needs for high-density storage by creating mobile quad-level cells (QLC) markets and diversifying product portfolios.

In the second half, demand is expected to gradually recover as customer inventory levels will have declined due to inventory adjustments occurring since the second half of last year. Set-Build demand is expected to improve with the launch of new smartphones and PC promotion. In addition, the portion of DDR5 for servers is expected to increase due to the expansion of new CPU adoption, and content-per-box will continue to grow as the transition to high-core CPUs accelerates.

For DRAM, the Memory Business plans to accelerate the conversion of cutting-edge nodes for DDR5 and LPDDR5x and actively respond to the strong market demand for HBM3 8H and 12H.

For NAND, the Memory Business will strengthen supply operations for products that customers need by creating a mobile QLC market and expanding the supply of cutting-edge nodes such as V7 and V8.

The System LSI Business’s earnings fell sharply in the first quarter due to a drop in demand for major products such as SOCs, sensors and DDIs. Nevertheless, System LSI achieved sales growth for mobile SOCs and launched an ultra-wide band-based short-range wireless communication semiconductor.

In the second quarter, the System LSI Business expects overall demand to remain at a similar level, but there is some visibility regarding declines in customer inventories for products such as sensors and panel DDIs. Demand for inventory accumulation ahead of the third quarter peak seasonality should also contribute to a slight earnings recovery.

In the second half, the System LSI Business expects customer inventories to normalize for system IC components, and overall mobile demand is likely to recover, starting with a recovery in the Chinese market. System LSI will try to re-enter flagship segment to strengthen the business competitiveness of the mobile SoC business and also expect to expand business areas as a customer is planning to commercialize fingerprint authentication-based credit cards with more enhanced security.

The Foundry Business saw demand contract in the first quarter. This resulted in high inventory levels and a subsequent decline in orders that led earnings to fall significantly.

The Foundry Business is mass producing the 1st generation 3nm process by applying GAA technology, with yields remaining stable into and throughout the quarter. It is also developing the second-generation process and is focused on securing new orders from key customers who need high-performance, low-power characteristics in mobile and HPC applications, aiming for mass production in 2024.

In the second quarter, the Foundry Business expects earnings to improve slightly quarter-on-quarter thanks to a rebound in demand. In addition, the basic infrastructure of 2nm designs has recently shown meaningful silicon results, and development progress is on track. The Foundry Business also secured the foundation to support future products for generative AI by completing the development of a high-density memory integration technology.

In the second half, the market is expected to recover around HPC/Auto and earnings are projected to rebound accordingly. Based on the stable development of second generation 3nm GAA, the Foundry Business will expand new customer orders and strengthen its technical leadership by smoothly advancing the development of 2nm, the next-generation technology.

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Source: Samsung