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Asian chipmakers fall as Samsung posts worst quarterly profit in 8 years

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Asian chipmakers fall as Samsung

Attendees line up under a large LED display of smart home products to enter the Samsung Electronics booth, during the Consumer Electronics Show (CES) in Las Vegas, Nevada on January 6, 2023.

Patrick T. Fallon | AFP | Getty Images

Semiconductor stocks in Asia fell as South Korean chip giant Samsung Electronics suffered its worst profit decline since the third quarter of 2014.

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Its fourth-quarter operating profit fell to 4.31 trillion won ($3.4 billion) — down 69% from the same period a year ago when it raked in 13, 87 trillion won.

Operating profit for the last three months of 2022 was the lowest since the quarter that ended in September 2014, when it recorded 4 trillion won.

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It comes as global smartphone shipments have plunged to a level not seen since 2013, marking the biggest drop on record.

Shares of chipmakers in Asia posted losses as Samsung said it would continue capital spending over the coming year, in which it spent a total of 47.9 trillion won for semiconductors in 2022.

The company was expected to cut additional spending as global demand deteriorated.

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Shares of Samsung Electronics fell 3.6% in Seoul’s trading session on Tuesday. Competitors like SK Hynix also fell more than 2%, while Taiwan semiconductor manufacturing company also fell 3.9% in Asia trade.

Japanese chip makers Tokyo Electron fell 1.14%, Renesas electronics lose 0.97% while Pre-test fell 1.7%. Lasertec also fell 2.07%.

“Without a significant production adjustment, I think it will be difficult to match the current supply and demand mismatch,” SK Kim of Daiwa Capital Markets told CNBC’s “Street Signs Asia.”

American semiconductor manufacturer Micron announced last month that it would cut its workforce by 10% in 2023 and reduce capital spending, which Kim called “insufficient”.

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“We expect Samsung and other major memory makers to [to] reduce their production by at least 20%, that’s something we had planned to [the] end of this quarter versus the second quarter,” Kim said.

Despite deteriorating economic conditions, Samsung Electronics said it expects demand to pick up later this year.

Semiconductors power everything from smartphones to electric vehicles. We think troubled stocks in the sector look poised for recovery.

“For 2023, while macroeconomic uncertainties are expected to persist, the company expects demand to begin to recover in the second half of the year,” it said in a statement.

“The semiconductor industry will continue to strengthen its market and technology leadership and expand the proportion of advanced nodes and products.”

“Prepared for recovery”

JPMorgan Private Bank said the semiconductor industry provided an attractive entry point for investors as chip stocks saw steep declines in 2022.

“Looking at price movements, earnings expectations and [price-to-earnings] multiples, the industry now appears close to a cyclical bottom,” its strategists Jacob Manoukian and Jonathan Linden said in a report earlier this month, citing data from Global Semiconductor Trade Statistics.

Samsung Electronics and other memory chip makers could cut production by 20%, analyst says

“Semiconductors power everything from smartphones to electric vehicles. We think struggling stocks in the sector look set to rally,” they wrote.

Yuanta Securities’ Daniel Yoo agreed that it might be time to buy chip stocks.

“I think it’s a buying opportunity, but the question [mark] whether or not a really meaningful turnaround happens in the second or third quarter,” he said on CNBC’s “Street Signs Asia.”

“We see the continued significant increase in terms of demand regarding data centers or various areas,” Yoo said. “It is also possible that the demand related to AI will increase this year.”

– CNBC’s Chery Kang contributed to this report.

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