Samsung will make fewer memory chips to slow down price declines

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

Competitors such as Micron and SK Hynix have already scaled back 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 be able to respond to future changes in demand’, which means the company can now scale back production. However, the company continues to invest in the memory market as it expects demand to rise again in the longer term.

Demand for memory chips has fallen as consumers and business customers purchase fewer new products due to the current economic conditions. Because memory chip manufacturers did not reduce production quickly enough, the price of these chips fell. Samsung has not said how much it will reduce production. The company believes that the Semiconductor business had a loss of 2.8 billion euros in the first quarter of 2023, reports Sammobile. The last time that 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, expects Samsung 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. This profitability in the past quarter is due to a good quarter at the smartphone branch, which had an operating profit of around 2.29 billion euros. Samsung will release the final quarterly figures later this month.