Samsung Electronics continues to grapple with overproduction in its semiconductor sector, leading to an inventory exceeding 50 trillion won in the first quarter of this year. The inventory of the semiconductor business has surpassed 30 trillion won, driven by a prolonged slump in demand.
According to the quarterly report disclosed by Samsung Electronics on May 15th, the total inventory assets of the company as of the end of March stood at 54.4196 trillion won (US$40.7270 billion). This is the second-largest inventory amount following 57.3198 trillion won (US$42.8975 billion) at the end of September last year.
While Samsung Electronics succeeded in reducing its inventory assets by 9.0% to 52.1879 trillion won (US$39.0568 billion) at the end of December last year, it has been unable to surmount the slump in demand, leading to a 4.3% increase in inventory assets compared to the end of last year.
Notably, the inventory assets of the semiconductor business have broken through the 30 trillion won mark. As of the first quarter of this year, the DS division's inventory assets are 31.9481 trillion won (US$23.9042 billion), a surge of 2.8905 trillion won (US$2.1627 billion) from the previous quarter's 29.576 trillion won (US$22.129 billion). The proportion of semiconductor inventory makes up 58.7% of the total.
The inventory turnover rate also suffered, declining from 4.1 times at the end of last year to 3.5 times in the first quarter of this year. The inventory turnover rate, an indicator measuring how quickly a company sells its inventory assets, reveals a slowdown in the conversion rate of inventory assets into sales.
Also, the value of the inventory is dropping as the sales prices in the memory market continue to tumble. Samsung Electronics incurred an inventory asset valuation loss of 2.512 trillion won (US$1.880 billion) in just the first quarter.
However, it's observed that the rate of increase in the production capacity of memory products, which account for the largest share of inventory, has been rapidly declining since the first quarter of this year. Samsung Electronics has initiated production cuts, primarily focusing on older process products, in an effort to alleviate inventory burdens.
The memory production capacity of the DS division, calculated on a 1Gb basis, was 465.88 million Gb in the first quarter of this year, a mere 0.7% increase compared to 462.5 million Gb in the same quarter of the previous year. This represents a significant deceleration compared to the 24.9% growth rate in the first quarter of last year. Samsung Electronics' memory production capacity is trending downwards, with 919.91 million Gb in the third quarter of last year and 493.43 million Gb in the fourth quarter. The impact of this reduction is anticipated to become evident from the second quarter of this year.
Despite the slowdown in business conditions, Samsung Electronics has made a record-high investment. The company's facility investment for the first quarter of this year was recorded at 10.7388 trillion won (US$8.03550 billion). Of this, over 90%, or 9.7877 trillion won (US$7.3238 billion), was allocated to the semiconductor business alone. Furthermore, total R&D spending also saw an increase of 700 billion won (US$524 million) from the same period last year to 6.6 trillion won (US$4.9 billion)
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