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Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

South Korea's exports have continued to decline this month, heightening concerns about the economic outlook ahead of the Bank of Korea's interest rate decision this week.

South Korea's Customs Administration said on Tuesday that daily exports in the first 20 days of February fell 14.9 percent year-on-year. This latest data points to further weakness in global demand, following an 8.8% year-on-year decline in average daily exports in January.

Data show that from February 1 to 20, South Korea's overall exports fell by 2.3%, of which chip exports plummeted 43.9%.

South Korea's trade deficit reached $6 billion in the first 20 days of February, compared with $10 billion in the same period in January, data showed. South Korea's trade deficit reached $12.69 billion in January, a record monthly high.

Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

Conceptual diagram of South Korea's leading chip company Source: Baidu

South Korea's twin heroes were frustrated

From the perspective of the industry, the global semiconductor market boom continues to decline, and the demand for memory chips is sluggish, resulting in the semiconductor industry entering a cold winter, so that the price of DRAM, NAND flash memory and other products has fallen significantly, which directly affects the performance of SK Hynix. In addition, the market share of Korean memory chip manufacturers is declining. The DRAM field is particularly acute. Samsung is the most obviously damaged.

SK Hynix's operating performance in the fourth quarter of 2022 turned from profit to loss, with a net loss of 3.5 trillion won (about 19.2 billion yuan), with a net loss rate of 46%. This was SK Hynix's first quarterly operating loss since the third quarter of 2012 and the company's largest quarterly loss in history.

Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

SK hynix factory Source: Baidu

Samsung, which has the largest market share in the global memory chip industry, has also "chilled" performance. According to the financial report disclosed on January 31, 2023, in the fourth quarter of 2022, the operating profit of Samsung's semiconductor business, which is dominated by memory chips, was 270 billion won, down 96.9% year-on-year, and the revenue of semiconductor business in the quarter fell 23.6% year-on-year to 20.07 trillion won.

Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

Samsung factory Source: Baidu

At present, Korean companies dominate the memory chip industry. As of the third quarter of 2022, Samsung (31.4%) and SK Hynix (18.4%) together accounted for 49.8% of the NAND Flash market; In the DRAM market, Samsung (39.7%) and SK Hynix (29.5%) together account for 69.2% of the market share.

The root cause of chip winter

The semiconductor industry is experiencing a new Great Depression, and the world's largest semiconductor companies, including Intel, are facing operational crises. Globally, the aftermath of the pandemic is still affecting confidence in economic recovery and supply chain security. Trade disputes escalate. The development of scientific and technological innovation has encountered bottlenecks.

In January this year, the chip giant's performance exploded. Intel's revenue in the fourth quarter of 2022 fell 32% year-on-year, the lowest since 2016, and the guidance given for the first quarter of this year is a "disaster", if it comes true, Intel's revenue level will return to 13 years ago.

Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

Intel chip concept map Source: Baidu

After the outbreak of the new crown epidemic, the demand for electronic equipment increased sharply, and chip manufacturers took the opportunity to expand production capacity, but it did not take long for consumer demand to decline significantly, and chip inventories piled up, causing prices to plummet.

A severe decline in memory chip prices, combined with a weak global economic performance, led most chipmakers to cut capacity and delay expansion plans in the second half of last year.

Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

Intel Chengdu factory Source: Baidu

Those who dare to counterattack the game breaker - Samsung

In contrast, Samsung Electronics, the world's largest memory supplier, did the opposite, the company still adhered to aggressive capital expenditure plans, Samsung operated against the trend, not only memory expansion did not step on the brakes, wafer foundry also expanded production in South Korea, affecting the development of the global semiconductor industry.

This brave operation can be regarded as going against the current! Samsung remains betting on the long-term outlook of memory chips, cloud services, connected cars and the growing popularity of artificial intelligence systems, all of which have strong demand for storage.

Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

Samsung chip products Source: Baidu

Reuters quoted analysts as saying that Samsung Electronics continues to invest in the chip business, which may help it win the memory chip market share when demand picks up, as well as boost the company's stock price.

Korean chips don't work? In the first 20 days of February, chip sales plunged 43.9% year-on-year

Reuters Inc. Source: Baidu

Author: Xinguang Dog Typesetting: LEAHMA Produced by: SOlab

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