South Korean IT giant Samsung Electronics announced that it will cut spending after surrendering a record. It is believed that the two-year memory chip boom has ended.
On October 31, Samsung released its third-quarter earnings report for 2018. The company's profits and revenues rose sharply, breaking the historical record. According to CNBC's report, Samsung's profit reached a record-breaking third quarter at the end of September. 17.57 trillion won (about 15.5 billion U.S. dollars), an increase of 21% over the same period last year. The consolidated quarterly revenue reached 65.46 trillion won, an increase of 5.5% over the same period last year.
Samsung said that the performance was boosted by strong sales and increased production of memory products, which are mainly used in smartphones and data centers. In addition, the higher demand for OLED display panels by major customers has also contributed to the performance.
But looking ahead, Samsung said that the company's overall revenue will decline with the seasonal decline in semiconductor demand.
According to Reuters reported on October 31, Samsung said that due to the low demand for memory chips and the increase in marketing expenses for smartphones during the year-end holiday season, it is expected that fourth-quarter earnings will decline from the previous quarter. Samsung also mentioned, 'Outlook 2019, due to Seasonal factors, earnings in the first quarter of 2019 will be weak, but as the business environment, especially the memory market, improves, earnings will increase.
To this end, Samsung announced that it will cut its capital expenditures by more than a quarter during the year, and its capital expenditure in 2018 will fall 27% from last year's record-breaking 43.4 trillion won to 31.8 trillion won ($28 billion). .
Moreover, Samsung also warned investors that the company's profit will fall in the next quarter. Reuters believes that this means the end of the high-speed growth period of the global market chip.
Some analysts said that because the price of some memory chips has dropped to a low level of more than two years, and competitors will start a new production line next year, for Samsung, reducing capital expenditure will reduce the growth of memory chip supply and price decline. Worry.
HI Investment Securities analyst SongMyung-sup said, 'Toshiba's new production line will start, and SK Hynix also launched one of the flash production lines for mass production. The price of flash memory chips (NAND) will be next year. The first half of the year will continue to decline, and the oversupply will continue.
Samsung tried to calm investors' concerns about the rapid decline of the chip market, saying that due to the rapid growth of the world's cloud data services, the market demand for servers is strong.
ChunSewon, senior vice president of Samsung Memory Marketing, told analysts, 'Short-term price changes will always be there, but fundamentally, our memory demand base is very strong.' He also said that the company believes that it is now in the server industry. The beginning of the 'benign rising cycle' of chip sales.
Samsung also said that the company is considering converting some flash (NAND) production lines to DRAM chips (memory chips) in 2019, and will not increase production capacity when flash chips are overproduced.