Micron weather vane semiconductor earnings also “reduce investment in facilities”… Will Samsung and SK breathe? [MK위클리반도체]

Micron, also known as the semiconductor earnings weathercock, said its fourth-quarter earnings forecast will be the lowest in five years. Accordingly, he announced that he would reduce investment in production facilities and utilization rates in order to recover sales. It is worth noting whether Samsung Electronics and SK Hynix, which are about to announce their earnings, will continue a similar trend.

Micron announced on the 29th (local time) that, through its earnings data, its sales in the first quarter of fiscal 2023 (September-November) are expected to be $4.25 billion (about 6.1 trillion won). Micron recorded sales of $4 billion in the second quarter of fiscal 2020 (December 2019 to February 2020), about three years ago, and the number it offered is the lowest in the last five years. Bloomberg reported that the figure was well below the market consensus of $6 billion.

Micron is the third largest company in the DRAM market. According to TrendForce, Micron’s share of the DRAM market was 24.5% in the second quarter, ranking third after Samsung Electronics (43.5%) and SK Hynix (27.4%).

Micron said it was responding quickly to market conditions of reduced demand. Micron CEO Sanjay Merotra said capital spending would drop 30% in 2023. “We are taking steps to reduce supply expansion, including cutting nearly 50% of our wafer fab capex compared to last year, ” he said.

After the earnings announcement, the share price fell more than 4% in after-hours trading, but the stock rebounded slightly after Merotra’s CEO said he was responding promptly in the subsequent conference call.

Micron is known as the industry’s performance weathercock because of its early earnings announcement among memory semiconductor companies. The third quarter (July to September) is generally considered to be the peak season for the semiconductor market. However, this year, the use of semiconductors used in data centers as well as electronic products such as PCs and smartphones has fallen significantly due to concerns over a sharp rise in inflation and economic downturn, and performance declined due to a decline in demand.

As Micron’s slowdown is confirmed, concerns are mounting about Samsung Electronics and SK Hynix, which are due to release earnings next month. On the 30th, IBK Investment & Securities lowered its target price from 130,000 won to 100,000 won for SK Hynix, saying, “The sluggish performance is expected to start from the third quarter of this year.” Kim Un-ho, a researcher at IBK Investment & Securities, analyzed, “As DRAM bit growth (the rate of increase in DRAM production in terms of bits) declines and prices also decline significantly compared to the second quarter, volume will the operating profit. a decrease of 14% compared to the previous quarter.” “Supply adjustment is considered to be an appropriate alternative at this time,” said researcher Kim.

However, as spring comes after winter, Micron predicted that the situation would improve in the second half of next year. “Memory prices are expected to improve from the second half of next year,” said CEO Merotra Micron.

With this observation deck, SK also intends to strengthen its long-term investment without saving. On the 29th, SK Siltron decided to invest 2.3 trillion won over the next five years to expand 300 mm (12 inch) silicon wafers. The large-scale investment was made even in a situation where the semiconductor industry is fluctuating due to shrinking demand. Although the semiconductor industry is extremely volatile, it is interpreted as having made bold investments to gain an edge in the competition for supply and demand for wafers two or three years down the line. Earlier, SK hynix also decided to invest 15 trillion won over the next five years to build a new semiconductor production plant in Cheongju, North Chungcheong Province.

Amid concerns about the semiconductor industry, it is a preemptive measure for wafer manufacturers to actively invest. This is because the semiconductor price cycle is getting shorter and the growth potential of system semiconductors is ample. In fact, Taiwan Global Wafers announced plans to build a $5 billion silicon wafer factory in Sherman, Texas, USA this year. It equates to 1.2 million 12 inch wafers per month. Construction is expected to start before November and be completed in 2025. Sumco, the second largest in the industry, announced plans to build a new factory worth 2.4 trillion won at the end of September last year and will begin mass production second half the year.

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