The sluggish demand for memory chips continues to make things difficult for world market leader Samsung. In a departure from its previous position, the electronics group from South Korea is cutting the production of semiconductor memories. The production volume will be adjusted to a “reasonable level”, it said surprisingly in a stock exchange announcement on Friday. The company also reported its lowest quarterly operating profit in 14 years in an earnings outlook for the months of January through March.
According to preliminary figures, profit from ordinary activities fell by almost 96 percent to 600 billion won (about 417 million euros) in the first quarter of 2023. Samsung expects sales to decline by 19 percent to 63 trillion won (43.7 billion euros). The company, which is also the market leader in smartphones, traditionally only presents more precise figures at a later point in time.
The chip industry has been struggling with falling prices and an oversupply for a long time. The high inflation had dampened consumer sentiment, which also weighed on the chip producers.
Production volume down, but investment plans remain
Although the company has cut short-term production plans, robust demand is expected again in the medium and long term, it said. Affected by the throttling are products for which there is sufficient inventory to meet customer needs. It was unclear how extensive the production cut would ultimately be.
At the same time, the company indicated that it would not withdraw from its investment plans. It will “further invest in the infrastructure to ensure the essential clean rooms,” it said, referring to the special manufacturing processes in semiconductor production. Research and development spending would also increase.
Last month, Samsung announced that it would invest 300 trillion won ($250.1 billion) over the next 20 years in a new semiconductor industrial complex near the capital Seoul and build its own manufacturing facilities there. According to government plans, the world‘s largest semiconductor site is to be built in Gyeonggi Province by 2042.
(jss)