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Weak memory demand leaves both Samsung and SK hynix nursing losses

With inventory surplus still an issue, revenues are 'bottoming out'

Sluggish global demand has left Samsung and SK Hynix - the world's top two memory makers - reporting similar hefty losses for Q1, with promises that more profitable days are coming thanks to production cuts.

For Samsung, revenue dropped [PDF] 18 percent year-on-year to ₩63.7 trillion ($47.6 billion). Operating profit was the lowest seen by the company since 2009 at ₩640 billion ($478.5 million), a number 95 percent lower than the ₩14.12 trillion recorded in the year prior.

Within its Device Solution (DS) division, memory revenue dropped 56 percent to ₩8.92 trillion ($6.6 billion), while SK hynix reported a more than 58 percent revenue drop to ₩5.1 trillion ($3.8 billion).

Operating profit dropped the most since 2012, the year SK Group acquired Hynix, as it widened from a profit of ₩2.86 trillion ($2.1 billion) in Q1 2022 to a loss of ₩3.4 trillion ($2.5 billion).

Samsung attributed its overall decline to an "uncertain macroeconomic environment" and its memory segment to inventory surplus.

"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," it said.

It said weak DRAM movement was partly down to hyperscalers adjusting inventory. Purchasing delays and set-build reductions also played a part as the company waits for mobile and PC demand to recover.

Continued conservative purchasing from hyperscalers is expected to slow NAND recovery, said Samsung.

Richard Gordon, Gartner VP for semiconductors and electronics, told us earlier this week that the tech sector should be careful "not to get into a doom spiral."

"Semiconductor companies are also sitting on inventory waiting for it to go out the door, and it can take six to nine months for inventory to flush out," Gordon told us, adding: "recovery is on its way – the slump will bottom out this year."

Both Korean memory makers predicted market recovery for memory in the second half of 2023. SK hynix referred to revenues as "bottoming out" in Q1 and said it expects improvement in Q2 as production cuts made by suppliers take effect.

Samsung announced a chip production cut to reduce excess inventory and industry downturn in early April, a move already taken by other companies including SK hynix and Micron.

Samsung echoed the sentiments, saying demand is expected to gradually recover in the second half of 2023 "amid projections that customer inventory levels will have declined."

As for what to do in the meantime, SK hynix plans to focus on the sales of high-performance DRAM products, including server DDR5 and HBM, as well as 176-layer SSD and uMCP products in NAND, while shifting toward making chips for up and coming technologies like AI.

"With the commitment to stay on top of demand for high-capacity server/mobile products, we will focus on customer needs by creating a mobile QLC NAND market and expanding the portion of cutting-edge nodes such as V7 and V8," said Samsung. ®

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