Samsung: World's biggest memory chip maker to cut production, profits drop 96%

Companies are buying fewer chips to lower their stockpiles, which has been linked to a weakening global economy.
Baba Tamim
Samsung Semiconductor Europe headquarters.
Samsung Semiconductor Europe headquarters.


Samsung Electronics has declared that it will decrease chip production as a result of a dramatic decline in semiconductor demand globally, causing prices to fall sharply.

The biggest memory chip manufacturer in the world has said that it will reduce chip production by a "significant" amount due to a dramatic decline in sales and lower than projected first-quarter profits, which are predicted to fall by 96%, according to multiple media sources on Friday. 

"We are lowering the production of memory chips by a meaningful level, especially that of products with supply secured," the company said, referring to customers with adequate stockpiles of chips. 

"Samsung talking about production cuts is evidence of how bad the current slump really is," Greg Roh, the head of research at Hyundai Motor Securities, told The Guardian

Meanwhile, Micron Technology in the US and SK Hynix, a fellow South Korean manufacturer, have also cut back on manufacturing.

Companies are buying fewer chips in an effort to lower their stockpiles, which has been linked to a weakening global economy.

Following the Covid-19 epidemic, when demand for consumer electronics spiked due to people being stranded at home during lockdowns, which caused a global chip scarcity, chip purchases by smartphone and personal computer manufacturers increased.

However, as a result of customers limiting larger purchases in the face of the rising cost of living and rising food and energy prices, demand has since decreased.

Decrease profit post-pandemic

Samsung has previously discussed making tiny adjustments, such as halting output to upgrade production lines.

Yet, it has now acknowledged that it will be drastically reducing chip manufacturing, indicating that it will be concentrating on reducing the manufacture of memory chips by a large amount, especially that of products with supply secured.

Samsung has said that, despite the output reductions, it will keep funding infrastructure and research. To what extent will the company stick to its investment intentions for this year, the corporation did not confirm.

SK Hynix and Micron both reduced their investment projections by more than 30% in September and October, respectively. SK Hynix stated that it would more than halve its capital expenditure in 2023 compared to 2022.

According to projections, Samsung will report a quarterly profit of 600 billion won ($450 million) from January through March, down roughly 95.8% from 14.12 trillion won in Q1 2022. 

Although the company wouldn't reveal its results until later this month, Bloomberg data indicates that analysts anticipated it to report a 1.4 trillion won quarterly profit for Q1. The company predicted that its first-quarter revenue would decrease to 63 trillion won from 77.78 trillion won a year earlier.

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