Samsung Electronics announced its business performance for the first quarter of 2023 on the 27th. Based on consolidated financial statements, sales were 63.7454 trillion won, down 18% year-on-year, and operating profit was 640.2 billion won, down 95.5% year-on-year. Net income for the period was 1.5746 trillion won, down 86.1% year-on-year.

Samsung Electronics said that sales in the first quarter were slowed by overall consumer sentiment due to global economic uncertainty and concerns over an economic slowdown.

■ Performance by sector, semiconductor sector turns to deficit

Samsung Electronics' operating profit in the DX division improved, led by MX, but the component business profit decreased due to sluggish demand, resulting in an operating profit of KRW 0.64 trillion, down KRW 3.67 trillion from the previous quarter. It was also explained that the operating profit ratio decreased by 5.1%p to 1.0%.

By business division, the DS division was greatly affected by the decrease in demand and recorded a deficit in operating profit. The deficit widened to -4.58 trillion won on sales of 13.73 trillion won. It was reported that demand for memory semiconductors was sluggish due to high inventory of customers such as servers for DRAM. In the case of NAND, despite the weak demand for servers and storage, the company actively responded to the demand for high-capacity products, and bit growth (the rate of increase in production converted to bits) exceeded market expectations.

System LSI saw its performance decline due to a sharp decline in demand for major products such as SoC (System on Chip), sensors, and DDI (Display Driver IC) due to sluggish demand in major applications such as mobile and TV. Foundry saw its performance decline due to a contraction in demand caused by the global economic downturn and a decrease in orders caused by increased inventory at customers.

The DX division saw increased sales due to brisk sales of new flagship smartphone products. It recorded sales of KRW 46.22 trillion and operating profit of KRW 4.21 trillion. Despite the negative market growth, MX (Mobile eXperience) saw sales increase compared to the previous quarter due to brisk sales of the Galaxy S23 series, and profitability recovered to double digits. In addition, it is reported that operating profits for the flagship, A series, and tablets all improved significantly due to improved process operation efficiency.

The network saw a decrease in sales, especially in major overseas markets such as North America and Southwest Asia. VD evaluated that profitability improved both quarter-on-quarter and year-on-year by focusing on premium TV sales and reducing operating costs amid a weakening TV market demand due to the off-season and the global economic downturn. Home appliances recorded performance at the same level as the previous quarter due to continued weak demand and cost burden.

In the SDC division, sales amounted to 6.61 trillion won and operating profit amounted to 0.78 trillion won. Displays saw a decline in performance due to a market contraction in the small and medium-sized panel market, but maintained its market leadership in the premium market with the expansion of foldable models and brisk flagship sales. The deficit in large panels was reduced with the launch of new QD-OLED products.

Samsung Electronics is pouring huge amounts of money into facility investment worldwide. Facility investment in the first quarter was 10.7 trillion won, and by business, it was 9.8 trillion won for semiconductors and 0.3 trillion won for displays. In the case of memory, the completion of the Pyeongtaek 3rd phase to secure mid- to long-term supply and the 4th phase infrastructure investment to respond to advanced process demand were carried out. In addition, R&D expenses were 6.58 trillion won, breaking the record for the previous quarter, and continuing to respond to the next-generation market.

Foundry investments are being made primarily in the Taylor and Pyeongtaek plants in Texas, USA, to meet the demands of advanced processes. The display said that small and medium-sized module supplementation and infrastructure investment were implemented.

■ Targeting the premium market amidst a slump in semiconductor demand

Samsung Electronics forecasted that weak demand would continue in its outlook for the second quarter of 2023, and expected a gradual recovery in business conditions in the second half of 2023 amidst the global demand recovery outlook.

Accordingly, the DS division announced that it will continue its efforts to strengthen technological competitiveness such as GAA (Gate-All-Around) 2 nanometer while responding to demand for high-end products such as DDR5 and LPDDR5x, and the DX division will pursue solid profitability by expanding sales of new smartphone and TV models.

For memory, it said it will respond to the demand for DDR5 and high-capacity modules due to the launch of new CPUs for servers and the expansion of AI demand, as well as the demand for LPDDR5x for high-end mobile devices, while for NAND, it will actively respond to the demand for high capacities across all applications based on cost competitiveness.

Although the overall demand for System LSI is slowing down, it is expected that customers will be looking to stock up on DDIs for sensors and panels. For mobile SoC, it announced that it will expand its partnership with AMD in the graphic design asset (IP) sector.

Foundry is expected to have a positive impact on performance as customer inventory situations gradually improve. The 2nm design basic infrastructure is in development, and the development of 8-stage HBM3 2.5D package technology, a high-capacity memory integration technology, has been completed to support future generative AI products.

Samsung Electronics announced that it will respond to the market by adjusting production downwards in the second half of the year, focusing on legacy memory process products, while increasing the proportion of advanced processes and high value-added products. In addition, it was reported that the company will accelerate the transition to advanced processes such as DDR5/LPDDR5x, strengthen operations by creating a mobile QLC market in NAND, and expanding the proportion of advanced processes such as V7/V8.

System LSI said it plans to strengthen its competitiveness to re-enter the flagship mobile SoC market and expand into new business areas such as fingerprint authentication ICs for biometric authentication cards with enhanced security.