Stiff Challenges to 'Semiconductor Korea'
How Long Will Semiconductor Boom for Korea Last?
Seoul, Korea
8 January 2018 - 10:30am
Cho Jin-young
South Korea's semiconductor companies with memory semiconductors achieved the highest performances in a super-cycle which began in earnest in 2017.
However, corporate customers' complaints spiked due to continuous hikes in prices of DRAMs and NAND flashes. In particular, Chinese smartphone makers such as Huawei and Oppo were reportedly very unsatisfied with the hikes as they had to stand small margins due to Apple's iPhone and Samsung’s Galaxy series. However, there was no way to stop the rise in prices of semiconductors because demand eclipsed supply.
Of late, some countries has been trying to keep “Semiconductor Korea,” which has been benefiting from the super cycle, in check. The United States and China, which are the biggest semiconductor consumers, are mounting pressure on Korea's semiconductor companies for their protectionism.
Memory semiconductors are Korea's largest export item. The Ministry of Trade, Industry and Energy announced on January 1 that Korea's semiconductor exports ballooned 57.4% year on year to US$97.94 billion. This figure is more than Korea's total exports of US$96.01 billion in 1994 and one sixth of Korea's total exports of US$573.9 billion, an all-time high in 2017.
Samsung Electronics and SK Hynix Renew Quarterly Earnings
Samsung Electronics and SK Hynix leading “Semiconductor Korea” really enjoyed the memory semiconductor super cycle in 2017. DRAM and NAND flash prices which started to climb in the second half of 2016, continued to rise throughout 2017.
Samsung Electronics, the No. 1 DRAM maker and NAND flash maker in the world, posted operating profits of 6.31 trillion won (US$5.67 billion) in the first quarter, 8 trillion won (US$7.2 billion) in the second quarter and about 10 trillion won (US$9 billion) in the third quarter. Its operating profit margins reached close to 50%.
Although the fourth-quarter settlement of accounts remains, it is certain that Samsung Electronics will outperform Intel in 2017 and rank first in the semiconductor market in terms of sales. This means that Intel will slide to second place in 24 years since the company rose to the top as the semiconductor king in sales.
SK Hynix also recorded the best performance ever. Starting in the first quarter of 2017, the company started its business with an operating income of 2.46 trillion won (US$2.2 billion), which is 800 billion won (US$720 million) more than 1.66 trillion won (US$1.49 billion), the previous highest operating profit. In the second quarter, its sales, operating profits and net profits all reached record-highs. This record continued in the third quarter, achieving triple honors for two consecutive quarters. Cumulative operating profit by the third quarter ran to 9.25 trillion won (US$8.3 billion), with annual operating profit exceeding 10 trillion won (US$9 billion) and 13 trillion won (US$11.7 billion). There is a possibility that its operating profits will exceed 16 trillion won (US$14.4 billion) in 2018.
When Samsung Electronics and SK Hynix renew their respective operating profits, investors are paying attention to "When will this party end?" Foreign securities firms came up with reports with red flags raised and the market sensitively responded to such reports.
US and Chinese Semiconductor Companies Launching Series of Attacks
It is being observed that Chinese and US semiconductor companies are trying to tackle Korean semiconductor companies enjoying a semiconductor boom in various ways.
Chinese companies are jumping on Korean companies, citing DRAM prices, and US companies are filing patent infringement lawsuits against Korean companies.
The US International Trade Commission (ITC) said on December 21, 2017 (local time) that US semiconductor company Bit Micro will filed a lawsuit against SSD (solid state drive) makers such as Samsung Electronics and SK Hynix for a violation of Article 337 of the Customs Act. Also accused were HP and Dell of the US, ASUS and Acer of Taiwan, Lenovo of China and VAIO of Japan among others.
continues at businesskorea.co.kr |
