On July 3, according to Reuters, data showed that Samsung's second-quarter profit may shrink by more than half, because Samsung's decline in chip shipments to Huawei led to price squeeze and oversupply.
Analysts pointed out that the second quarter results will be the lowest level of Samsung in the past three years. Due to the overall slowdown in the market, the oversupply situation will continue for some time and may take several quarters to return to normal.
Huawei is an opponent, but also a customer.
Samsung is the world's largest supplier of DRAM and NAND memory chips, and Huawei is the second largest customer of its chip business. As the United States listed Huawei as an "entity list" of embargoes, many companies temporarily suspended business dealings with Huawei, which caused a certain impact on Huawei, which in turn affected Samsung's chip sales.
Jay Kim, an analyst at Sangsangin Investment & Securities, said: "Huawei's future chip purchases are definitely a swing factor for prices. When no customers can replace Huawei to buy enough chips, Samsung will have to sell at a reduced price."
Although the chip business has been hit by Huawei's events, Samsung's smartphone business may benefit from it. It is predicted that the international sales volume of Huawei mobile phones may drop by as much as 40%. However, Huawei still has strong enough support from the Chinese market. It is known that this is the world's largest smartphone market, and Huawei's global ranking is hard to be adversely affected.
Although at the just-concluded G20 summit, Trump said that allowing US companies to continue to supply to Huawei, intends to relax the ban on Huawei. However, Huawei’s alarm has not been lifted. Many industry insiders have told the micro-grid reporter: “Trump’s credit is zero. Regardless of the outcome of the negotiations, the US’s technical blockade against China barely sees the possibility of braking.”
Because of this, Huawei founder Ren Zhengfei said that Huawei is adapting to the new era of US hostility and will continue to reduce its dependence on US suppliers in the future.
In addition, Huawei is still not expected to increase chip purchases in a short period of time, so Samsung's chip business will still be affected in the third quarter. CLSA's latest research report pointed out that in the overall smartphone supply chain, in the next three to six months, Huawei may have to clean up the current large inventory, and will not continue to purchase in the case of external procurement. Present a negative situation.
House seemingly endless rain
The chip business generated more than two-thirds of the total profit for Samsung. In addition to Huawei's reduced purchase volume, the demand for saturated smartphone market and data center is also declining.
Trendforce analyst Avril Wu pointed out that the price of DRAM chips is unlikely to rebound in the second half of this year, and that it is difficult for Samsung to clear its inventory before the first half of 2020. According to Trendforce, DRAM prices have fallen by 25% in the past three months (as of June) and are expected to fall by 15-20% in the third quarter.
Samsung will announce its final results for the second quarter later this month. But according to RefinitivSmartEstimate, 29 analysts concluded that Samsung's operating profit for the second quarter will fall 60%, about 6 trillion won ($5.14 billion), compared with Samsung's operating profit of 149,000 in the same period last year. 100 million won.
Recently, the Japanese government suddenly announced that it will launch two-stage export control for South Korea. The restricted material exports include high-purity hydrogen fluoride used in IC manufacturing to etch chips and photoresists that must be used during lithography. The memory business has brought new shocks.
It is understood that 70% of the hydrogen fluoride in global semiconductor companies comes from Japanese manufacturers. The four Japanese manufacturers of JSR (28%), Tokyo Yinghua (21%), Shin-Etsu Chemical (13%) and Fuji Electronics (10%) accounted for 72% of the global market share of photoresist.
Due to the high market share of Japanese manufacturers, even if it is a supplier change, it will be difficult for Samsung to provide sufficient production materials in a short period of time.
When do you call the cloud day?
In the long run, Samsung’s hopes may have to be pinned on Huawei’s troubles. SongMyung-sup, senior analyst at HiInvestment & Securities, said that if the United States continues to impose sanctions on Huawei, Samsung may sell 37 million more smartphones per year, and the extra phones will install Samsung's own chips, thus alleviating the pressure of oversupply.
In April this year, Samsung said that it expects smartphone and chip sales to pick up in the second half of the year, Micron also said that memory chip demand will resume later this year.
ICInsights pointed out in the report that ICInsights expects the IC market to rebound in the third quarter of this year, given the cyclical nature of the semiconductor industry, and the IC market has never experienced a four-quarter decline. Smartphone traditional season. Therefore, Samsung's overall performance in the second half of the year is expected to be better than the first half.
In addition, the large-scale popularization of 5G will be a good time for Samsung to wipe out the haze. In this wave of change, Samsung will benefit from the smart phone business, and the chip business is expected to regain its growth.