Dragged down by memory chip sales, Samsung’s 2022 show the company continuing to invest heavily in capex to take a hit in profits.
But there was some good news from Samsung Displays (SDC):
SDC posted KRW 9.31 trillion ($7.53 billion) in consolidated revenue and KRW 1.82 trillion ($1.46 billion) in operating profit for the fourth quarter.
The mobile display business achieved solid results by focusing on high-end smartphone products despite market demand continuing to contract. For the large display business, its losses lessened in the fourth quarter thanks to increased sales of TVs during the end-year peak season. In addition, the Company exhausted its LCD inventory, completing the switch to a full-fledged QD-OLED centered business.
Looking ahead to the first quarter, Samsung expects smartphone demand to decline year-on-year due to the economic slowdown in major regions. The Company will strive to maintain its solid earnings for the mobile display business by actively responding to launches of flagship products by major customers.
In the large display business, Samsung will secure additional demand and promote an early ramp-up with the introduction of a new lineup of ultra-large TVs and large-size monitors.
In 2023, the business environment is expected to remain challenging due to unstable market conditions and intensifying competition. For the mobile display business, the Company plans to strengthen its market dominance with technological superiority in the relatively solid high-end smartphone market. In addition, Samsung will capitalize on the accelerated transition to OLED by leveraging its cost competitiveness, which is the result of its preemptive investments.
In the large display business, the Company will continue to improve profitability by solidifying its sales base in the premium market, backed by stable yields.
Samsung
So, I will say that while investors may baulk at Samsung continuing to invest so heavily during a downturn, it actually makes sense because Samsung can take out a lot of the competition with less resources, and it is investing predominantly in the semiconductor space, where we have talked on these pages about the geopolitical realities of chip manufacturing. Samsung is probably hoping to stomp out as much out of the competition as it can while they suffer.
Doesn’t mean Samsung is shirking on the display side of things:
Samsung Display (SDC) is not standing still in OLED notebook display technology even though they already completely dominate this rapidly growing market. According to DSCC’s Quarterly Advanced IT Display Shipment and Technology Report, SDC had a 99.8% share in OLED notebook displays in 2022 and is expected to enjoy a 99.3% share in 2023. However, that isn’t stopping SDC from continuing to innovate, which allows them to charge more and enjoy higher margins, rewarding investors, etc.
Last week, SDC announced that they had begun production in January of notebook panels with on-cell touch AMOLED (OCTA) technology. SDC first developed OCTA for smartphones on rigid OLEDs in 2010 and later added it to flexible OLED smartphone panels in 2016 and foldable OLED panels in 2019. In the case of rigid OLED notebooks, SDC is fabricating the touch sensor after the glass encapsulation process. Flexible and foldable OLEDs use thin film encapsulation (TFE) instead of rigid encapsulation. SDC currently has 10K/month capacity for fabricating the OCTA sensors at its A2 fab. Fabricating touch sensors require using backplane equipment such as CVD, PVD, exposure, coater/developers, inspection, etc., after cutting the glass, so there must be some modification to the handling equipment of the backplane tools. SDC reportedly has plans to expand OCTA capacity at A2 from 10K to 30K substrates per month.
DSCC
SDC gives a sign of some upside, but the uncertainties of this year remain. The second half of 2023 should be lit, if we are going by what everyone seems to be saying when they release their earnings reports, but then again, maybe we have too much riding on the outcome. Consumers will have to be ready to open up their wallets in many generous ways in this mystical second half of 2023, but we are not sure exactly why that is, are we.
Ultimately, it may be that Samsung is going to throw everything it has at the market, and overwhelm the competition. That sounds a lot more appealing as a strategy than let’s just email a lot of people that they are being laid off, hunker down, hoard our cash, and then fret about why sales are not going where they should..
