Samsung is going to make fewer memory chips to slow down the price drop

Samsung Semiconductor says it is cutting memory chip production “to a meaningful level” to reduce the company’s inventories and curb falling prices. Samsung’s chip division probably turned a loss last quarter, for the first time in more than 10 years.

Competitors such as Micron and SK Hynix have already reduced the production of dram and nand memory chips in the past year because there was more supply than demand, but Samsung continued to maintain production. Samsung says according to Bloomberg has now built up enough inventory “to respond to future changes in demand”, which means that the company can now scale back production. However, the company continues to invest in the memory market as it expects demand to pick up again in the longer term.

Demand for memory chips has declined as consumers and business customers buy fewer new products due to the current economic conditions. Because memory chip manufacturers did not cut production fast enough, the price of these chips fell. Samsung does not say how much it will reduce production. The company thinks that the Semiconductor arm had a loss of 2.8 billion euros in the first quarter of 2023, reports Sammobile. The last time Samsung’s chip branch made a loss was in the first quarter of 2009. In the previous quarter, this chip branch had a net profit of 202 million euros.

Despite the loss at the Semiconductor business, expect Samsung to have achieved an operating profit of around 417 million euros in the past quarter. Turnover was expected to be around 43.8 billion euros. A year earlier, Samsung had an operating profit of 9.8 billion euros, on a turnover of 54.0 billion euros. That profitability in the past quarter is due to a good quarter in the smartphone branch, which had an operating profit of around 2.29 billion euros. Samsung will publish its final quarterly figures later this month.