Samsung Electronics and other Asian technology stocks tumbled on Friday on fears the sputtering global economy will crimp demand for computers and TVs and hurt earnings at chip and panel makers for the rest of the year.
Investors, who had expected Japan's earthquake three months ago to lift prices of memory chips and flat screens, dumped shares of tech firms in South Korea, Taiwan and Japan.
The tech sector serves as the bellwether for global consumer demand and its outlook has been soured by the debt crisis in Europe and sluggish U.S. job and housing markets.
The tech momentum appears to be dead, said Cha Kyung-jin, a fund manger at Golden Bridge Asset Management, which owns Samsung shares. Expectations have been lowered on the global economy and tech earnings in the second half.
Shares in Samsung Electronics, the world's biggest technology firm by revenue, slid 3.4 percent in its biggest daily decline in three months.
Hynix Semiconductor, the world's No.2 memory chipmaker, skidded 6.1 percent, and LG Display, which vies for the world's top flat-screen maker title with Samsung, tumbled 6.8 percent, amid lowered earnings expectations.
In Japan, Elpida Memory lost 2.8 percent and Taiwan's Nanya Technology dropped 7 percent, while AU Optronics and Chimei Innolux lost 5.1 percent and 4.1 percent, respectively.
There are concerns that tech firms may see little earnings recovery in the second half after posting poor second-quarter earnings. There is traditionally high demand in the second half, but seasonality may be weak this year because of macroeconomic difficulties, said Park Jong-min, a fund manager at ING Investment Management.
Businesses are reluctant to build up inventory because of macroeconomic uncertainties and as they have already piled up components after the March 11 quake on fears of a parts shortage, he said. ING owns shares of Samsung and Hynix.
The regional MSCI technology index lost 1.8 percent on Friday. The U.S. Philadelphia Semiconductor Index shed 1.1 percent on Thursday, and has fallen 16.5 percent in four months.
LOWERED EARNINGS OUTLOOK
Global PC shipments, which in recent years grew by double digits annually barring 2009 and serve as a key growth driver of the memory chip industry, are set to grow by only 5 percent this year as consumers opt for popular tablets and smartphones.
Samsung, which is set to update the market with its second-quarter earnings estimates in the first week of July, declined to comment on the current quarter's results.
Second-quarter is a typically weak season but the market condition was slightly worse than usual because tightness that many people had expected after the quake didn't really happen due to weak demand, said a senior executive at a major Korean electronics firm. The official declined to be named because he was not authorized to speak to the media.
Analysts' expectations for a recovery in the loss-making flat screen businesses of Samsung and LG Display have now been pushed back from the second quarter as TV sales remain weak.
Samsung' second-quarter operating profit is forecast to be around 4 trillion won ($3.66 billion), Thomson Reuters I/B/E/S data showed, compared to 5 trillion won a year ago.
Earnings expectations were being downgraded further.
We recently lowered our second-quarter operating profit forecast on Samsung Electronics to 3.6 trillion won, said Jin Seong-hye, an analyst at Hyundai Securities.
Hynix is seen posting a 553 billion won operating profit for the quarter ending in June, according to Thomson Reuters I/B/E/S, compared with a 1 trillion won operating profit a year earlier.
I cut my consensus forecast (for Hynix's second-quarter earnings) to 420 billion won, but I am also hearing talk in the market of 360 billion won, said James Song, an analyst at HI Investment & Securities.
(Editing by Jonathan Hopfner and Muralikumar Anantharaman)