Samsung is having trouble when they "have not avoided the melon skin to meet the coconut shell". Forecast of Q2 business results will reduce 56% of operating profit, while Japan has just imposed export restrictions on important materials.
Their semiconductor unit is currently facing a drop in memory chip prices, causing profits to plummet. But the recent ban has made the business environment more harsh, as the material needed for chip production from Japan is limited. Resistors (resistors) are used in ultraviolet photodiode processes, while Pi plastic for flexible OLED displays is particularly important for foldable screen applications.
Trade war between Japan and Korea is closer than ever
According to the newspaper Nikkei, a Samsung official said they were "was shocked" and describe this situation "Unbelievable". The Korean company is reported to have only enough inventory left for a month, with HF used in chip manufacturing. An analyst asked them to temporarily cope by reducing production by 20-30%, which in part would help to prevent the decline in memory chips when cutting supplies. However, most of the time, they all expressed their poor thinking about this situation. Japanese moves directly hit Samsung's weakness, as the critical supply for chip production was interrupted. Compared to home appliances, smartphones, TV, … chip business is still the most important part for Samsung.
The role of the chip is evident in the forecast that has just been made by the company. Revenue decreased 4%, operating profit decreased 56%. The cause of the decline was mainly due to the price of DRAM and NAND flash dropped without braking, 50% lower than the same period last year. Samsung shares fell after the information was released. Analysts said that this quarter, the unit of memory chips will be reduced by 70% of profits. This downward movement makes the overall operating profit go down. The demand for weak memory chips led Samsung to stock up on DRAM inventories for up to three months, three times the usual amount.
Compared to home appliances, smartphones, TV, … chip business is still the most important for Samsung
The situation will be even more dramatic at the end of the year, DRAM price will drop by 10%. For the whole year, profit from semiconductor will drop by 50% compared to last year. Some observers also believe that the memory chip business is falling into red alert. As a result of the free fall, Samsung will be overtaken by Intel in the semiconductor industry. It is estimated that their annual revenue will be $ 52.8 billion and Intel is $ 69 billion, the first time the US company overtook Samsung in the last three years.
Of course Samsung will not "fold your arms and wait for death" in this situation. Despite the surprise, the company is still the largest memory chip company in the world, they must find a way to overcome supply restrictions to maintain production. Accordingly, sources from the company said that they are actively looking for alternatives to Japanese partners, two materials of contrast material and HF gas are prioritized first. One said "almost impossible" replacement of contrast material, heavily dependent on Japan. But with HF gas, some companies in Belgium and Korea can help.
Contrast can be considered the biggest challenge for Korean government and businesses
Contrast can be considered the biggest challenge for Korean government and businesses. The Japanese government's decision, however, was quick but computational. They perform an effective front-line attack on the semiconductor industry, targeting only those that South Korea cannot produce on its own, or that it is difficult to find alternative sources in a short time. The Japanese government's Ministry of Economy, Trade and Industry (METI) put four contrasting substances (positive) into restricted areas. First, the type for wavelengths from 15nm to 193nm; Two is the type for wavelength from 1nm to 15nm. Three is for electron beam or ion beam; and finally used for nano point litho printing equipment (imprint lithography).
Different photolithography processes rely on semiconductor processes, with the smaller the wavelength, the more accurate and higher quality finished products. Experts analyze that the type of light barrier of 15nm to 193nm uses ArF light source (Argon Fluoride). The type used for wavelengths from 1nm to 15nm is the EUV process. According to Professor Ahn Jin-ho of Hanyang University, Samsung (and SK Hynix) is currently using light-emitting diodes for ArF and EUV light sources with wavelengths ranging from 13.5nm to 193nm. The intention of the Japanese government is to establish a restriction order according to the wavelength range. More importantly, the type used for EUV is particularly meaningful to Samsung's future, when they are racing the 7nm process.
The Japanese government restricts the export of contrast material to "destroy" Samsung
The chipmaker of the company receiving orders from NVIDA, Qualcomm and plans to use the EUV process. Therefore, the Japanese government put the type of contrast used for this process into the list, in order to "destroy" Samsung. They even deliberately omitted the type used for the 248nm wavelength with the light source KrF (Krypton Fluoride). Because this type has been produced in Korea, they have carefully calculated the list of restricted substances enough to put pressure on Korea.
And yet, they also make it difficult for Korean corporations to do R&D. There are contrast materials for the next semiconductor technology research. Electronic beams and ion beams are also used to produce masks in the semiconductor industry. They contribute to the next generation of light sources, which can engrave ultra-smooth circuits with shorter wavelengths than the current EUV. Imprint lithography (Imprint lithography) is a photolithography process that can print nano patterns on a wafer, which is considered a future technology.
They even make it difficult for both research and development of new semiconductor technology
Thus, according to the limited list, the Japanese government not only blocks types for commercial purposes, but also the kind used by universities and research institutes. A representative in the semiconductor industry is pessimistic that the stockpiles are only enough for a month, and the source of replacing the recognized contrast is impossible. A straightforward industry expert said it would take at least 5 years to completely replace the dye from Japan. Surely Samsung could not wait that long, because this was a diplomatic issue, so they better find a way to settle it with Japan.
The Korean government will actively work with large businesses, including Samsung, to resolve this issue. The value of chip exports as well as the future of Korea's semiconductor industry, depends heavily on Samsung, and the company is now blocked from manufacturing supplies. As their chip array is severely declining because of the plunge in selling prices, the smartphone market is in decline, this is really a bad situation!