HONG KONG, Jan 6 (Reuters Breakingviews) - South Korea's Samsung Electronics (005930.KS) can only defy gravity for so long. The world's top memory-chip maker on Friday said it estimates quarterly operating profit will fall a whopping 69% year-on-year in the three months to December to an eight-year low of $3.4 billion as demand for semiconductors plunge. The worse-than-expected earnings guidance throws cold water on the chipmaker's aggressive supply and capital expenditure spending plans laid out in October.
Even as rivals like SK Hynix (000660.KS) said it would more than halve 2023 capex, Samsung at the time insisted it won't "artificially" cut production - a sign that the $308 billion behemoth was moving to shore up its market dominance. That now looks less likely: a severe supply glut is on track to drag down average selling prices of DRAM and NAND memory chips by 47% and 53% respectively this year, according to Morgan Stanley analysts. Notably, the bank reckons Samsung will record its first-ever annual loss in the latter business. Projector Light
Analysts at Citi reckon Samsung’s memory chip capex this year will be roughly $25 billion, more than 10% lower than their earlier forecast. Less output should pave the way for a market recovery in the second half. Samsung's best laid plans are starting to go astray. (By Robyn Mak)
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