The Semiconductor Industry Shock Has Begun... Samsung and Micron Both Report 'Bleak' Q3 Earnings

Micron and Nanya 3Q Earnings Fluctuate
Samsung Electronics and SK Hynix Earnings Forecasts Continue to Decline
3rd Quarter, Usually Considered Peak Season, Faces 'Challenges' This Year

Semiconductor image / Source=Pixabay

[Asia Economy Reporter Kim Pyeonghwa] As the memory semiconductor market freezes, there are forecasts that related companies' third-quarter earnings will be sluggish. In the memory industry, starting with the earnings announcements of U.S. Micron Technology and Taiwan's Nanya, many companies' results are expected to surface, making these forecasts a reality. Samsung Electronics' third-quarter operating profit forecast has dropped to the 11 trillion won range.

According to the semiconductor industry and securities firms on the 29th, Micron will announce its fourth-quarter results (June to August this year) for the 2022 fiscal year on the same day (local time). When Micron announced its third-quarter results in June this year, it expected fourth-quarter earnings to be between $6.8 billion and $7.6 billion (approximately 9.7036 trillion to 10.8452 trillion won). However, as the market downturn deepened, it revised its forecast last month, indicating that actual results might fall short of expectations. Mark Murphy, Micron's Chief Financial Officer (CFO), expressed concerns at a company event, stating that semiconductor demand is broadly declining.

Along with Micron, Nanya, a memory semiconductor company known as an industry earnings barometer due to its early earnings announcements, also has a bleak third-quarter outlook. According to Taiwan media Digitimes Asia, Nanya's sales decreased in both July and August this year. In August, sales recorded $111.3 million (approximately 158.8 billion won), down 22.2% from the previous month. Nanya's sales and operating profit had already dropped by more than 20% year-over-year in the second quarter.

The outlook for the third quarter is worsening for the domestic semiconductor industry, which focuses on memory semiconductors. Samsung Electronics and SK Hynix had third-quarter operating profit forecasts of around 17 trillion won and 4 trillion won respectively three months ago, but recently these have remained at about 12 to 13 trillion won and 2 trillion won. SK Hynix, whose memory accounts for over 90% of total sales, is suffering more severely. On the 27th, IBK Investment & Securities further lowered its forecast for Samsung Electronics' third-quarter operating profit to 11.624 trillion won, a 17.6% decrease from the previous quarter, revising down already reduced market expectations.

The third quarter is generally considered a peak season in the semiconductor market. However, this year, inflation, global economic slowdown, weak demand, inventory increases, and semiconductor price declines have sequentially impacted companies' earnings, adding to the gloomy outlook. The downturn in the memory semiconductor market is particularly pronounced, deepening the concerns of related companies. The World Semiconductor Trade Statistics (WSTS) has revised this year's memory market growth rate down from 18.7% to 8.2%. Although the recent exchange rate surpassing 1,400 won is expected to have a positive effect on earnings due to foreign exchange gains, this is also considered limited.

U.S.-based Western Digital expects its third-quarter earnings to decline by about 19%. The drop in NAND flash prices is notably affecting profitability. David Goeckler, CEO of Western Digital, commented this month that the macroeconomic situation is unfavorable and "getting increasingly difficult." According to market research firm TrendForce, NAND prices in the third and fourth quarters are expected to decrease by up to 18% and 20%, respectively, compared to the previous quarter.