Samsung Electronics: June-Quarter Preliminary Numbers In Line, Memory Price To Rebound in 2024

Samsung Electronics’ 005930 preliminary numbers for the June quarter were slightly below our forecasts, but there were no real surprises, as we had predicted in advance based on Micron Technology’s earnings results that actual memory prices would be lower than our assumptions. Meanwhile, we retain our view that memory price erosion would be less pronounced in the September quarter and would bottom out in the December quarter as supply/demand tightens. On the demand side, we believe that the inventory digestion for smartphones and PCs is largely complete, so customer procurement should return to normal levels. On the supply side, we believe that the utilization cut implemented by all memory suppliers will be more effective in the September quarter. We believe tight supply will persist throughout 2024, as capacity expansion for this year will be marginal, as memory suppliers—especially SK Hynix and Micron—are prompted to cut capital expenditure in 2023 to protect their cash and profitability. As a result, we remain optimistic about memory prices in 2024. While we currently have a 3-star rating on both Samsung Electronics and SK Hynix due to the recent rally, we believe the outperformance is likely to continue in the near term, supported by the continued rise in memory prices and news flow on artificial intelligence server investments.

We will review our earnings forecasts and fair value estimates for Samsung Electronics and SK Hynix after their earnings conferences scheduled in late July. The focus will continue to be on 1) the progress of the inventory adjustment on major applications, such as smartphones, PCs, and servers; 2) the outlook for utilization cuts and capital expenditure; 3) the outlook for memory prices; and 4) comments on the impact of rising AI server investments.