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Several chipmakers in Asia suffered drawdowns to their shares in the aftermath of poor global smartphone shipments.
The shares of chipmakers in Asia experienced a decline on the heels of Samsung Electronics’ worst quarterly profit since Q3 2014. The 2022 fourth-quarter operating profit of the South Korean multinational electronics corporation fell to 4.31 trillion won, or $3.4 billion. This descent marked a staggering 69% drop from the year-ago period when Samsung raked in 13.87 trillion won.
Samsung’s latest operating profit was the lowest realized in eight years when the South Korean consumer electronics giant recorded 4 trillion won. Furthermore, the shares of chipmakers in Asia experienced losses as Samsung announced a continuation of capital expenditure in the upcoming year. This announcement went against the consensus’ expectations regarding the company’s capital expenditure guidance.
Last year, Samsung spent a total of 47.9 trillion won on semiconductors. Meanwhile, analysts had widely expected the company to reduce further spending amid worsening global demand.
Samsung’s shares slid 3.6% in Seoul’s trading session on Tuesday, with rivals like SK Hynix also falling more than 2%. In addition, the shares of renowned semiconductor company Taiwan Semiconductor Manufacturing Company also dropped 3.9% in Asia trade.
Shares of Asia Chipmakers Such as Tokyo Electron & Lasertec Take Hits
Meanwhile, notable among the Asian chipmaker declines were Tokyo Electron which fell 1.14%, and Renesas Electronics, with a 0.97% dip. Advantest also slid 1.7%, while Lasertec experienced a 2.07% setback.
In the US, chipmaker Micron Technology Inc (NASDAQ: MU) announced plans to reduce its headcount last month. According to the Utah-based company, it would downsize by 10% this year and also cut its capital expenditure. However, SK Kim of Daiwa Capital Markets suggests that these efforts may not be enough. In a media session, Kim explained further:
“Without some meaningful adjustment in production, I think it’ll be difficult to match the current mismatch in supply and demand.”
According to Kim, a more substantial production cut of at least 20% by major chipmakers might be more sufficient to weather 2023’s macroeconomic constraints. However, despite worsening economic parameters, Samsung expects demand to pick up later in the year.
Plunge in Global Smartphone Supply
Samsung’s unsavory Q4 2022 outing comes amid the global plunge in smartphone shipments, not seen since 2013. This plunge in shipments during the final three months of last year marked the most significant decline of its kind ever. In addition, global smartphone supply was severely impacted by macroeconomic headwinds and waning consumer demand. Commenting on the development, Nabila Popal, research director at IDC, said:
“We have never seen shipments in the holiday quarter come in lower than the previous quarter. However, weakened demand and high inventory caused vendors to cut back drastically on shipments.”
Furthermore, IDC research director Anthony Scarsella predicted how the smartphone sales plunge would impact vendors and wholesale buyers going forward. Scarsella explained that “with 2022 declining more than 11% for the year, 2023 is set up to be a year of caution as vendors will rethink their portfolio of devices while channels will think twice before taking on excess inventory.”
It is widely expected that several more tech-oriented firms will downsize as macroeconomic factors continue to impact businesses.
