Moody's downgrades Samsung Electronics' outlook amid chip sector doubts

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Moody's downgrades Samsung Electronics' outlook amid chip sector doubts

Samsung Electronics headquarters in Seocho District, southern Seoul [NEWS1]

Samsung Electronics headquarters in Seocho District, southern Seoul [NEWS1]

 
Samsung Electronics' outlook was downgraded from stable to negative by Moody's as the global rating agency raised doubt over the company's ability to regain its top status in the chip industry. 
  
Moody’s Aa2 credit rating of Samsung Electronics remains unchanged. Aa2 is the third-highest rating in the table.
 
“The change in outlook to negative mainly reflects increased uncertainty over Samsung Electronics regaining its technology leadership in the memory chip industry, particularly in AI chips,” Moody’s Ratings Vice President and Senior Credit Officer Gloria Tsuen said in a press release Friday.
 
Moody’s said it expects the company’s profitability will remain moderate “over the next 12 to 18 months,” Tsuen said.
 
Moody’s explained that despite Samsung’s efforts to bounce back its memory and chip foundry business, the “evolving market dynamics” and “increasing competition from Chinese companies in low-end memory products” will deem the company difficult to regain leadership.
 
“The rapidly increasing demand for AI chips also heightens the technological difficulty in developing new, custom-made chips for customers in a timely manner,” Moody’s said, explaining that Samsung Electronics’ operating margin would remain moderately at 11 percent of the next 12 to 18 months.
 
Moody’s raised Samsung Electronics credit rating from Aa3 to Aa2 in 2022. 
 

BY CHO YONG-JUN [[email protected]]
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