SEMES, the largest semiconductor and display equipment company in South Korea and a subsidiary of Samsung Electronics, experienced a significant decline in performance last year due to the downturn in the semiconductor industry resulting in reduced demand for equipment. Specifically, SEMES saw a significant decline in equipment sales in China, which can be attributed to the consequences of US sanctions on China.

According to SEMES' audit and financial reports released on March 31, the company's sales last year were KRW 28,892 billion with an operating profit of KRW 2,193 billion. Compared to 2021, sales decreased by 7.6%, and operating profit decreased by 38%. After achieving sales of KRW 30 trillion for the first time last year, the company's sales fell to KRW 20 trillion this year.

SEMES produces and supplies semiconductor front-end process equipment such as etching, photolithography, and cleaning for Samsung Electronics. The main product is the etching equipment that removes foreign substances from the wafer, which accounts for about 30% of SEMES' total sales.

Analysts believe that SEMES' poor performance last year was largely due to the downturn in the semiconductor industry. Although Samsung Electronics has not officially announced a reduction in investment, it seems that the company has delayed the introduction of equipment.

In terms of regional sales, as of last year, SEMES' main customers were Samsung Electronics (78.8%), Samsung China (7.6%), Samsung Display (4.6%), and Samsung Austin (0.6%). Sales in China showed a significant decline, with SEMES' sales in Samsung's Chinese subsidiary falling from KRW 5,412 billion in 2021 to KRW 2,214 billion last year, a decrease of 59.1%. Sales in Samsung's Chinese subsidiary were at their lowest level since 2018.

Some analysts attribute this decline to the aftermath of US sanctions on China's semiconductor industry. A source from the industry stated that "Samsung Electronics has not yet specifically mentioned a reduction in investment in China."

As of the end of the fourth quarter of 2022, SEMES' semiconductor equipment orders backlog was KRW 736.9 billion, an increase of 123.2% compared to 2021. With increased gate balancing, the company is expected to achieve good results in the first half of this year. However, due to the global economic downturn and semiconductor companies cutting capital expenditures, profitability in the second half may deteriorate.