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Semiconductor wafers. (Yonhap)

“At least 2 trillion won for Samsung Electronics, potentially over 4 trillion won for Hynix.”

Operating losses for South Korea’s memory industry during the first quarter of this year may amount to trillions of won, analysts are predicting.

If Samsung Electronics records a quarterly deficit for its semiconductor sector, it will be the first in 14 years since the first quarter of 2009, shortly after the eruption of a global financial crisis.

On Sunday, Yonhap Infomax released a compilation of performance estimates released by security companies in the past month. The average projection for Samsung Electronics’ operating profits for Q1 2023 came out to 1.2354 trillion won — down by 91.25% from 14.1214 trillion won in the first quarter of last year.

Most securities companies predicted operating profits would be negative in the first quarter for Samsung Electronics’ mainstay device solutions (DS) division.

The companies predicted very big losses for Samsung's semiconductor division — ranging from 1.9060 trillion won (Hyundai Motor Securities) all the way to 4.471 trillion (Daishin Securities).

No Geun-chang, director of the Hyundai Motor Securities research center, said, “Inventory is up from the previous quarter for the mainstay DRAM and NAND [semiconductors], and foundry and system semiconductor (LSI) performance is expected to go down due to declining demand from client companies.”

SK Hynix experienced its first quarterly deficit in 10 years (since Q3 2012) when it recorded operating losses of 1.7012 trillion won in the fourth quarter of last year. Securities companies predicted the deficit could be much bigger in Q1 2023.

The average operating losses predicted for SK Hynix in the first quarter amounted to 3.6857 trillion won — more than double the loss in Q4 2022. The estimated losses have been even greater in more recent estimates, with some exceeding 4 trillion won.

Compared with Samsung Electronics, SK Hynix has suffered an even heavier blow to performance because memory semiconductors account for most of its sales.

“SK Hynix is inevitably going to face a bigger deficit because of the simultaneous declines in memory shipments and prices,” said Kim Dong-won, an analyst with KB Securities.

“The supply and demand situation is expected to improve gradually in the second half of the year as the drop in prices tails off and the reduced supplies show an effect,” he predicted.

Currently the top-ranked company globally in the memory semiconductor industry, Samsung Electronics is expected to increase its market share even more. While other global memory businesses have been implementing large production cuts since the second half of last year, Samsung Electronics has stuck to a policy of no cutbacks to production.

According to the Taiwan-based market research company TrendForce, Samsung Electronics’ DRAM market share was 45.1% in Q4 2022 — up by 4.4 percentage points from 40.7% the previous quarter.

In contrast, the second- and third-place companies — SK Hynix and the US company Micron — saw their respective market shares drop to 27.7% (down by 1.1 percentage points) and 23.0% (down by 3.4 percentage points).

Samsung Electronics also accounted for a NAND market share of 33.8% in Q4 2022, up by 2.4 percentage points from 31.4% the quarter before. The second-ranked company, Japan’s Kioxia, saw its market share fall to 19.1%, a 1.5-percentage point drop from the previous quarter. SK Hynix (including its subsidiary Solidigm) lost 1.4 percentage points of its market share to finish with 17.1%.

Securities company analysts are predicting the market share gap will widen even more during the first quarter of this year.

By Kim Hoe-seung, senior staff writer

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