Samsung Electro-Mechanics suffers inventory accumulation despite production cut

By Park Sae-jin Posted : May 23, 2023, 13:51 Updated : May 23, 2023, 16:59

[Courtesy of Samsung Electro-Mechanics]

SEOUL -- Sales data showed that Samsung Electro-Mechanics, the electrical component maker in South Korea, was stricken by inventory accumulation despite the fact that the company made a bold decision in late 2022 to cut production.
Samsung Electro-Mechanics mainly focuses on multilayer ceramic capacitors (MLCCs), printed circuit boards, and camera modules. The company is one of the top players in the global electric component market. The electric component maker's products are favored by electronics makers and electric vehicle makers.
The global electric component industry suffered a heavy hit during the COVID-19 pandemic due to lowered consumer appetite for electronics, triggered by fears over recession, sluggish stock market, and rising interest rates. Manufacturers and retailers are left with surplus inventory after demands were lowered as the world battled with the pandemic. Many companies' electric components and semiconductors' inventory levels exceeded the target level.
According to industry data released by securities firms, the accumulated inventory size of Samsung Electro-Mechanics as of March 2023 was worth 813.5 billion won ($620.5 million), up 15.8 percent compared to 702.9 billion won in the fourth quarter of 2022. The inventory increased despite the company cutting back on production and reducing the operation of its factories to about 60 percent of the normal level in the first quarter of 2023.
In the first quarter of this year, the package solution division recorded a factory operation rate of 57 percent, the component division of 59 percent, and the camera module solution division of 63 percent. This is a significant difference compared to last year's first quarter, where the package solution division had an operating rate of 100 percent and the component division with a 70 percent rate. However, the camera module division showed a similar level with 61 percent in last year's first quarter.
The problem lies in whether Samsung Electro-Mechanics, which is currently implementing severe reduction measures, can further reduce its inventory this year. This is uncertain due to the significant and prolonged impact of the global economic downturn since the beginning of the year.
Taiwanese market research firm TrendForce predicts that memory semiconductor inventory is still high, leading to a continuous decline in prices, with an expected 10 to 15 percent decrease in the second quarter. The market expert also anticipates uncertainty in price increases if inventory remains high in the second half of the year.
기사 이미지 확대 보기