Inflation Hits South Korean Chip Production; Samsung Braces To Win Market Share Capitalizing On Downturn

Author: Anusuya Lahiri | December 29, 2022 11:42am

• South Korea's chip production decreased for a fourth consecutive month in November, sliding 15% year-on-year for its most significant drop since 2009, Statistics Korea found. 
• South Korea's chip output was down 11% M/M as semiconductor inventories surged over 20% Y/Y, reflecting a supply glut as high inflation hit global demand for technology products after a two-year boom during the pandemic, Financial Times reports.
• South Korea is a leading producer of microchips with companies like Samsung Electronics Co, Ltd (OTC: SSNLF) and SK Hynix Inc (OTC: HXSCL).
• "The slowing global economy and large inventories have hit demand. Customers are not buying chips as demand has collapsed," said JJ Park, an analyst at JPMorgan in Seoul told FT. 
• "Inventory destocking will be completed throughout next year, and the market could rebound in 2024." 
• Chipmakers slashed investment plans to adjust to the oversupply. 
• SK Hynix, U.S. rival Micron Technology, Inc (NASDAQ: MU), and Japan's Kioxia Holdings cut spending.
• Industry leader Samsung stuck to its past strategy of increasing capital spending during the downturn to grab market share, analysts said.
• "Samsung is back-stabbing its fellow oligopoly competitors," Dylan Patel, chief analyst at semiconductor research group SemiAnalysis, wrote. "Samsung is looking for a Pyrrhic market share victory."
• Samsung's increased capital spending and chip production will exacerbate the global oversupply, analysts have warned.
• "The oligopoly is broken, as Samsung's new chair wants to eat market share," Patel noted, warning of "pure carnage" in the DRAM (dynamic random-access memory) market.
• Samsung will likely announce weaker fourth-quarter earnings next week.
• Photo by Pierre Lecourt via Flickr

Posted In: HXSCL MU SSNLF