Samsung Electronics Announces Third Quarter 2022 Results

Record third-quarter revenue of KRW 76.78 trillion, operating profit at KRW 10.85 trillion
Demand to recover partially in 2023 but macroeconomic uncertainties to persist

Samsung Electronics today reported financial results for the third quarter ended September 30, 2022.

Total consolidated revenue was a record for the third-quarter at KRW 76.78 trillion despite a challenging business environment, while operating profit declined 23% from the previous quarter to KRW 10.85 trillion. With record revenue in each of the respective quarters so far this year, the Company expects annual revenue to surpass the historical high set in 2021.

Earnings in the Memory Business declined as inventory adjustments of customers exceeded market expectations and demand for consumer products remained weak. The System LSI Business saw lower profits due to weak demand for mobile phones and TVs, while the Foundry Business posted a record quarterly revenue on improving yields in advanced nodes.

SDC (Samsung Display Corporation) saw record revenue for the mobile panel business as demand increased following the release of new flagship smartphones, including foldables, while the large panel business continued to post losses amid weak TV and monitor markets.

The MX (Mobile eXperience) Business posted solid profitability, driven by sales of flagship products, including foldables, as well as new wearables. The Networks Business saw an improvement in earnings, led by overseas businesses, including securing a deal with Comcast.

The Visual Display Business expanded sales of premium products, but earnings declined due to weak demand and increased costs. The Digital Appliances Business, despite enhanced product mix, saw continued challenges due to higher materials and logistics costs amid sluggish demand.

The strength in the U.S. dollar against the Korean won benefited the Company’s component businesses, resulting in an approximately 1.0 trillion won company-wide gain in operating profit compared to the previous quarter.

In the fourth quarter, while the Memory Business expects there to be fundamental server demand based on core infrastructure investments, inventory adjustments are likely to continue. The Company plans to actively address demand for high-density products and maintain priority on DRAM profitability. For the System LSI Business, new products from mobile customers are expected to drive growth in SoC revenue while in the Foundry Business, earnings momentum is expected to continue on solid demand from global customers and additional yield improvements.

SDC expects to maintain earnings growth in the mobile panel business, driven by strong demand for premium OLED panels for smartphones. The large panel business will expand the quantum-dot (QD)-OLED presence, increasing its customer base.

The MX Business will continue to sustain strong sales of premium smartphones and expand sales of tablets and wearables. The Company plans to focus on profitability amid ongoing macroeconomic uncertainties. For the Networks Business, the Company plans to expand overseas businesses, including in North America and Japan.

In the Visual Display Business, the Company will prioritize capturing demand in the premium segment and enhancing profitability through cost efficiency. The Digital Appliances Business will aim to increase revenue with higher sales in the premium segment and online channels during the year-end seasonality.

In 2023, demand is expected to recover to some extent, but macroeconomic uncertainties are likely to persist. The DS (Device Solutions) Division plans to actively address demand for high-density products and expand contributions from advanced nodes and adoption of new applications. The DX (Device eXperience) Division will continue to strengthen the leadership in premium segments and enhance the multi-device connectivity experience across mobile, TVs and home appliances.

In the Memory Business, after a dampened first half, demand is expected to rebound centering on servers as data center installations resume. The Company plans to align its supply strategy with the mid-term market outlook, taking into account the limited overall production in the industry. With the reorganization of the SoC business, the System LSI Business will further enhance competitiveness, and the Foundry Business is expected to reinforce advanced node technology leadership and win new orders in HPC and automotive segments.

For SDC, the Company plans to continue focusing on premium smartphones and boost sales to new applications, such as IT and gaming. The large panel business will seek to increase sales of QD-OLED by expanding the product lineup and enhancing the performance.

The MX Business will aim to boost revenue by increasing sales of flagship products centering on foldable devices and the S series. The Company also plans to secure solid profitability by strengthening large-screen premium tablets and maintaining high growth of wearables. The Networks Business will sustain revenue growth by expanding overseas businesses and reinforcing technology leadership in core 5G chips and vRAN (virtualized Radio Access Network) solutions.

In the Visual Display Business, the Company will maintain leadership in ultra large screen and premium market segments. The Digital Appliances Business will continue to make product innovations in energy-efficient and eco-conscious home appliances and aims to achieve revenue growth, mainly from the premium segment.

In the third quarter, Samsung Electronics’ capital expenditure reached KRW 12.7 trillion, including KRW 11.5 trillion spent in the DS Division and KRW 0.5 trillion in SDC. The cumulative total for the January-September period is KRW 33 trillion, with KRW 29.1 trillion allocated to the DS Division and KRW 2.1 trillion to SDC.

The full-year capital expenditure for 2022 is expected at approximately KRW 54 trillion, including KRW 47.7 trillion allocated to the DS Division and KRW 3.0 trillion to SDC.

This year’s capital expenditures in the Memory Business will focus on P3 and P4 infrastructure, as well as on advanced technologies, such as EUV, to enhance the Company’s market competitiveness. Investments in the Foundry Business will center on expanding the production capability at the Company’s sites in Taylor and Pyeongtaek to address demand for advanced processes using EUV, in line with our Shell-First strategy. For SDC, investments will focus on expanding the capacity of flexible displays for mobile products and improving the efficiency of large QD-OLED panel production.

Foundry Delivers Record Earnings; Memory To Aim for Higher-Than-Market Bit Growth in Q4

The Semiconductor businesses posted KRW 23.02 trillion in consolidated revenue and KRW 5.12 trillion in operating profit in the third quarter.

For the Memory Business, as customers’ inventory adjustments exceeded market expectations and the demand for consumer products continued to weaken, both DRAM and NAND bit growth were below guidance and its earnings declined compared to the previous quarter.

For DRAM, in the face of a worsening slowdown in demand across the industry, the Company maintained a disciplined sales strategy focused on profitability, and its inventory levels increased somewhat. For NAND, Samsung strengthened its product portfolio by consistently increasing the high-density portion in mobile and server OEM applications, but its overall bit growth was below guidance.

Looking to the fourth quarter, the Company aims to deliver bit growth that exceeds the market for both DRAM and NAND by actively addressing demand, focusing on high-density and high-performance products, in line with the needs of its customers.

For DRAM, Samsung will continue to strengthen its cost competitiveness and secure profitability by expanding cutting-edge node migration for server products and also prepare 16Gb-based products to cope with demand for high-density products of 64GB and higher. Moreover, the Company will focus on solidifying its market leadership by responding to LPDDR5x demand for new flagship mobile models. As for NAND, the Company will actively respond to the demand for high-performance and high-density products while also capitalizing on NAND’s high price elasticity to steadily unlock new demand.

Moving on to 2023, although geopolitical uncertainties are likely to dampen demand to some degree in the first half, demand may recover later next year, driven by resumed installations of data centers and the adoption of DDR5 for new CPUs. Regarding production, Samsung will align its supply strategy with mid-term outlook considering limited overall production in the industry. In particular, it will reinforce market leadership by actively meeting the rising demand for new interfaces, including DDR5 and LPDDR5/x, and for high-density products.

The System LSI Business saw its earnings decline in the third quarter due to a decrease in demand for major components. However, SoC revenue grew thanks to an increased portion of 5G, and the Company reinforced the foundation for mid- to long-term growth by winning OEM orders for automotive SoCs.

In the fourth quarter, Samsung expects sales in the SoC business to increase on the effects of a new product launch by major mobile customers, while its new low- to mid-priced SoCs are scheduled to start mass production.

In 2023, the Company will expand sales in volume-zone SoCs while also strengthening the competitiveness and status of flagship products. In addition, it will work closely with foundries in order to smoothly supply various 200-megapixel image sensors.

The Foundry Business achieved its highest ever quarterly revenue and operating profit in the third quarter thanks to steady improvements in advanced process yield and increased revenue contributions.

Following the shipment of the world’s first mass-produced 3-nanometer GAA, Samsung further strengthened its technology leadership by presenting next-generation 2-nanometer and 1.4-nanometer roadmaps.

In the fourth quarter, revenue is expected to see double-digit growth sequentially on solid demand from all applications, maximum production of an optimized product mix and an increased advanced-node portion of production. The Company also expects to deliver record sales and operating profit on an annual basis for 2022.

Looking ahead to 2023, demand in the first half is expected to slow temporarily due to macroeconomic uncertainties, an economic slowdown and inventory adjustments at customers. However, Samsung still expects to deliver annual growth on the back of second half contributions from mass production for new customer orders and continued strength in HPC, datacenter and Auto demand.

Mobile Display Earnings Improve; Large Display To Continue QD-OLED Expansion

SDC posted KRW 9.39 trillion in consolidated revenue and KRW 1.98 trillion in operating profit for the third quarter.

Mobile display earnings improved both year-on-year and quarter-on-quarter thanks to growth in demand attributable to launches of new models by major smartphone brands. The Company’s business strategy, which concentrates on premium OLED products led to the record-high quarterly earnings.

For large displays, although sales of QD-OLED products continued to rise, initial investment costs of QD-OLED caused continued loss.

Looking ahead to the fourth quarter, Samsung expects market growth to be weaker-than-normal due to sluggish consumer spending, despite strong seasonal effects for the smartphone and IT markets. The Company will try to maintain its earnings quarter-on-quarter by utilizing competitiveness in the high-end market and by capitalizing on favorable exchange rates, in spite of an otherwise unfriendly business environment.

In 2023, while macroeconomic challenges may persist, Samsung will focus on solid earnings through pre-emptive investments, development of differentiated technologies and effective management to ensure stable quality and yield. Also, the Company will collaborate more closely with customers to increase its OLED market share, promoting the advantages of OLED in new application areas such as IT, Automotive and Gaming.

In particular, in the AR/VR market, which is projected to enjoy full-fledged growth starting 2023, Samsung will develop the technologies that customers need and complete SCM in order to solidify its leadership in the display industry.

Flagship Sales Drive Mobile Profit; To Seek Revenue Growth and Solid Profitability in 2023

The MX and Networks businesses posted KRW 32.21 trillion in consolidated revenue and KRW 3.24 trillion in operating profit for the third quarter.

The MX Business posted higher revenue and operating profit from the previous quarter driven by new smartphone and wearable launches. Sales of the Galaxy Z Fold4 and Z Flip4 showed strong growth compared with the previous models, despite a challenging market environment. The Galaxy S22 series, launched in the first half, also maintained solid sales momentum, posting significant revenue growth from a year earlier.

Looking ahead to the fourth quarter, market demand for smartphones and wearables is forecast to increase from previous quarter due to year-end seasonality despite ongoing geopolitical issues and macroeconomic instability. Samsung aims to sustain strong sales of flagship products, including foldable devices and S22 series, and expand sales of Galaxy Ecosystem devices such as tablets and wearables. In addition, new mass market smartphone model launches is expected to help drive sales volume.

In 2023, smartphone and wearable markets are expected to grow amid continuing global economic instability. For tablets, while the low- to mid-end market is expected to contract slightly, demand for premium products is likely to remain solid. The Company will seek to maintain the high growth of foldables and expand sales of the S series, thus improving the product mix and extending revenue growth. In tablets, Samsung aims to increase revenue by reinforcing the premium product lineup and by enhancing the tablet experience through features such as S-Pen.

Moreover, the Company plans to provide a convenient multi-device experience based on SmartThings, while also boosting profitability through sales growth of Galaxy Ecosystem devices. With these efforts, it aims to achieve revenue growth in 2023 and secure solid profitability.

Visual Display Business To Focus on Premium Segment Leadership

The Visual Display and Digital Appliances businesses posted KRW 14.75 trillion in consolidated revenue and KRW 0.25 trillion in operating profit in the third quarter.

Overall market demand for TVs increased quarter-on-quarter in the third quarter led by improved seasonality, but contracted year-on-year, due to macroeconomic factors negatively affecting consumer demand. The Visual Display Business posted a decline in earnings, as a result of weaker demand, higher costs and unfavorable currency effects in some regions. Nevertheless, the Company solidified its leadership in the premium segment.

In the fourth quarter, Samsung expects market demand to improve quarter-on-quarter due to year-end seasonality, but macroeconomic uncertainties are expected to persist. The Company plans to utilize sales opportunities such as Black Friday and global sporting events, focusing on its Neo QLED, Lifestyle and super-big TVs. It will also focus on securing profitability through optimized operations and efficient cost management.

Looking ahead to 2023, overall TV demand is expected to remain stagnant, while demand for premium products including super-big TVs will continue to grow. Samsung will continue product innovation centered on premium products and strengthen its focus on sustainable, eco-conscious management.