[NewsSpace=JeongYoung Kim] Samsung Electronics, which posted a deficit in the semiconductor sector in the first quarter of this year due to deteriorating memory conditions, is expected to record a company-wide deficit in the second quarter. 

According to industries on the 23rd, Samsung Electronics almost reached a break-even point (BEP) in the first quarter and is expected to turn to a company-wide deficit in the second quarter.

Samsung Electronics' operating losses in the second quarter, estimated by securities firms that expected a deficit, were 1.286 trillion won in Hi Investment & Securities, 600 billion won in SK Securities, 400 billion won in EBEST Investment & Securities, and 279 billion won in Samsung Securities.

If Samsung Electronics records a deficit in the second quarter, it will be the first time in 15 years since the fourth quarter of 2008 when it recorded operating losses of KRW 940 billion on a consolidated basis. It is also the second time since the third quarter of 2000 when quarterly performance results were first announced.

As a result of the sluggish global economy and weak demand for front-line IT due to the prolonged downturn in the memory semiconductor market and increasing inventory, a large-scale deficit has become a reality. An analysis suggests that the performance of the MX (Mobile Experience) sector, which has shown good results thanks to the release of the Galaxy S23, has partially offset the semiconductor downturn.

However, with the semiconductor downturn deeper than expected, there is a weighty forecast that the DS (Device Solutions) sector will continue to post the same level of deficit as in the first quarter, and that even relatively strong businesses in the first quarter will see their performance weakened.

Hwang Min-seong, a researcher at Samsung Securities, said, "The first quarter results showed a small profit in the display, home appliance, and foundry sectors, which mostly offset the large semiconductor deficit thanks to the majority of it being offset by smartphones," adding, "In the second quarter, when the effect of new smartphones decreases, it is inevitable that there will be a deficit."

He also explained that "there is no immediate prospect of the semiconductor sector returning to profitability," and "the effects of the reopening of China, which was anticipated, are still limited to services such as restaurants and travel, and all are dealing with the risk of a possible downturn, even if customer inventories are somewhat depleted."

Despite the movement of global industry cuts, Samsung Electronics, which has adhered to its position of no artificial cuts, has reached the point of formalizing its semiconductor cuts due to an unprecedented large-scale deficit. 

Samsung Electronics announced its provisional performance for the first quarter, stating that it would "focus on meaningful profitability by securing supply-centric products...".

Many predict that Samsung Electronics' performance will bottom out in the second quarter and gradually recover due to semiconductor production cuts and improved business conditions.

It is expected that the reduction effects will be fully reflected from the second half of this year, and the decline in memory prices will also enter a stable phase.

Han Dong-hee, a researcher at SK Securities, said, "The second quarter will be the lowest point of this year's quarterly performance due to the continued memory deficit," adding, "Expectations for inventory decline in the third quarter will rise due to increased natural production effects."

However, some are cautious that the pace of performance improvement could be slow as it is not easy to rebound in the industry if demand recovery is not supported.

Nam Dae-jong, a researcher at eBest Investment & Securities, pointed out, "We expect our performance to form a low in the first half of the year, but we do not expect a dramatic improvement in the second half."

"Considering that it takes more than a year for smartphone companies to adjust their inventories, it could take more than six months for server companies to adjust their inventories," he added. "If high interest rates continue and inflationary burdens are highlighted again, the final demand recovery may be slow."