The world’s largest memory chip maker is experiencing a decline in sales due to a decrease in global demand for semiconductors.
Samsung Electronics will reduce chip production due to a significant decrease in global demand for semiconductors, resulting in plummeting prices. The world’s largest memory chip maker reported a significant decline in sales, and first-quarter profits are expected to fall by 96%, prompting the company to make a “meaningful” cut in chip output. SK Hynix of South Korea and Micron Technology of the US have also decreased production.
According to Greg Roh, head of research at Hyundai Motor Securities, “Samsung talking about production cuts is evidence of how bad the current slump really is.”
Although smartphone and personal computer makers increased their purchases of chips during the Covid-19 pandemic, resulting in a global chip shortage, demand has now decreased as consumers reduce spending on larger purchases amid rising food and energy costs.
Previously, Samsung had only mentioned making minor adjustments such as temporarily stopping production to upgrade their production lines. The company’s estimated operating profit for the first quarter, which is expected to be its lowest in 14 years, dropped to 600 billion won from 14.12 trillion won a year earlier. Detailed figures will be reported later this month.
Analysts are predicting a record loss of 2.1 trillion won in the quarter for the chip division, which typically accounts for half of Samsung’s profits.
Investors did not seem concerned about the production cuts, as they anticipate that the decrease in output will help stabilize chip prices, which have fallen by 70% in the past nine months.
Shares increased after the announcement that Samsung, the top market share company, would also be implementing production cuts. SK Hynix and Micron had already announced production cuts, so the market was waiting for Samsung to do the same. According to John Park, an analyst at Daishin Securities, “The fact that the number one market share firm is joining production cuts lifted shares.”
