Asian semiconductor shares drop as Samsung Electronics reports worst profit decline since Q3 2014, with 4.31 trillion won ($3.4 billion) operating profit in Q4, a 69% decrease from the previous year’s 13.87 trillion won.

Samsung’s Q4 2022 operating profit, at 4.31 trillion won ($3.4 billion), hit its lowest since Q3 2014 (4 trillion won). Global smartphone shipments saw the largest-ever decline, hitting a low not seen since 2013. Asian chipmaker stocks suffer as Samsung plans to continue its 2022 capital expenditure of 47.9 trillion won for semiconductors, despite global demand worsening and expectations of reduced spending.

On Tuesday, Samsung Electronics’ shares declined 3.6% in Seoul trade, and rival firms such as SK Hynix dropped more than 2%, with Taiwan Semiconductor Manufacturing down 3.9% in Asia. Japanese chipmakers Tokyo Electron fell 1.14%, Renesas Electronics 0.97%, Advantest 1.7%, and Lasertec 2.07%. SK Kim of Daiwa Capital Markets said on “Street Signs Asia” that without adjusting production, balancing supply and demand will be challenging.

It was announced last month by U.S. semiconductor maker Micron that they will cut their headcount by 10% and their capital expenditures in 2023, however, this was described as “not enough” by Kim. Kim stated that they expected Samsung and other major memory makers to cut their production by at least 20%, which was something they had anticipated from the end of the current quarter to the second quarter. Despite the worsening economic conditions, Samsung Electronics stated that they expect demand to recover later in the year.

According to a press release, the company anticipates that despite macroeconomic uncertainties expected to persist in 2023, demand will begin to recover in the second half of the year. It was also stated that the semiconductor business will continue to reinforce its market and technology leadership and expand the proportion of advanced nodes and products.

JPMorgan Private Bank stated that the semiconductor industry is attractive for investors as chip stocks experienced steep declines in 2022, and that according to their strategists Jacob Manoukian and Jonathan Linden, in a report released earlier in the month, the industry appears to be close to a cyclical bottom when considering price moves, earnings expectations and price-to-earnings multiples based on data from the World Semiconductor Trade Statistics.

Daniel Yoo of Yuanta Securities says that it may be the perfect time to buy chip stocks. He also adds that semiconductors power everything from smartphones to EV’s.