Samsung has warned of sluggish chip sales for the rest of the year and into 2023. A global decline in the demand for smartphones, computers, and data servers is causing this sharp downturn in the semiconductor industry. There are no signs of things improving anytime soon.
“The second half of this year looks bad, and as of now, next year doesn’t really seem to show a clear momentum for much improvement,” said Kyung Kye-hyun, Samsung’s co-CEO and head of the semiconductor division, during a media briefing earlier this week. He added that continued investment in production technologies and R&D (research and development) is key to overcoming such slowdowns. “Bad times can become good opportunities,” Kyung said without elaborating much.
Samsung recently opened its biggest semiconductor manufacturing facility yet at its Pyeongtaek campus in South Korea. The company is also constructing a new chip plant in the US. It is investing $17 billion in the new factory in Taylor, Texas. The Biden administration recently approved subsidies and tax credits for semiconductor companies to expand production in the US. The Korean firm also stands to benefit from this bill, which is worth roughly $77 billion, The Wall Street Journal reports.
Samsung is the world’s largest chip maker by revenue. But application processors have never been its strength. Instead, it dominates the memory chips market. The company’s foundry unit has been losing major clients to its arch-rival TSMC because of performance, thermal, and yield issues. Kyung acknowledged that and vowed improvements.
“In the foundry business, long-term strategic partnerships are important in addition to just winning customers, but we fell short in those aspects,” he said, adding that those issues damaged the company’s reputation in Silicon Valley and it needs to set things right.
Industry watchers are forecasting lower chip sales than expected in 2023
The semiconductor industry saw overwhelming growth during the coronavirus pandemic. The changing nature of work, education, and entertainment brought about an unexpectedly high demand for mobile devices, computers, and data servers. However, consumer spending on those products has declined lately amid global economic headwinds.
This slowdown began in the first half of 2022 but industry watchers were optimistic early on. However, it soon became clear that things aren’t going to improve in the short term. The curve may not turn until deep into 2023. Research firm World Semiconductor Trade Statistics recently lowered its semiconductor growth projection for 2022 from 16.3 percent to 13.9 percent, reaching $633 billion. It also lowered the growth forecast for 2023 from 5.1 percent to 4.6 percent.
While several chipmakers are scaling back capacity expansion in response to this slowdown, Samsung isn’t one of them. The Korean behemoth operates chip plants in the US, South Korea, and China. And it’s expanding its production capacity in the former two markets. In China, the company expects difficulties in bringing equipment for expansion due to the US export restrictions.
However, Samsung is preparing to avoid becoming collateral damage in the US-China conflict. China makes up about 40 percent of the global tech industry and the Korean firm wants to remain on good terms with the country. “Rather than taking sides in the U.S.-China conflict, we are working to find a win-win solution for all sides and think it’s the right direction to be going in,” Kyung said.