One reason you can never really predict how well a company or industry is going to do is that there can be so many surprise factors outside of the normal bounds of stocks and revenues. War, as it happens, is one of them. This is a fact that it seems Samsung is discovering as conflicts in the Middle East are causing issues—ones that the company says it is handling, but issues nonetheless.
Speaking in an earnings call, Samsung executive VP and CFO Soon-Cheol Park explained:
“Our semiconductor production lines are operating normally, and there have been no supply chain issues to date. While we source some process gases from Israel and the Middle East, we have secured sufficient safety stock and respond in line with local logistics conditions. Also, we have secured alternative logistic routes and diversified suppliers, including the U.S. and Japan. So the overall risk remains limited.”
Although the company says it will “maintain a stable power supply system”, it admits that oil prices are a problem:
“Oil price increases driven by the war are impacting global ocean and air freight costs, which is expanding the risk of higher shipping rates. In response, we are closely monitoring global inventory levels while optimising supply chain operations to minimise cost burden from international transportation.”
(Image credit: Remitski via Getty Images)
Regarding these shipping issues, Park said the company is “engaging in negotiations and utilising alternative transportation options to mitigate the impact of high logistics costs.”
However, the extent of shipping impacts is of course just as uncertain as the length of the war:
(Image credit: G.Skill)
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“In case the war is prolonged, we are developing diverse scenarios and through long-term contracts with logistics providers and fuel-linked freight rates, we plan to maintain cost competitiveness and supply capacity while strengthening our response capability to volatility.”
So, to simplify, the war in Iran is affecting Samsung because of impacts on process gas supplies and on oil prices that, in turn, affect shipping costs. Such geopolitical events can often serve as a reminder of just how interconnected markets are, especially markets like the semiconductor one, which requires so many different materials from so many different places.
It’s noteworthy, for instance, that PCB prices could be affected, too, and these are distinct from semiconductor chips.
Let’s also not forget that, for semiconductor customers and other downstream customers like us humble PC gamers, there is also the compounded effect of the AI-induced global memory shortage. Demand for chips from AI companies seems insatiable, and all signs point towards memory staying in short supply for quite some time.
For how long the war in Iran will affect semiconductor material supplies and electronics prices, however, is less certain.
