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HomeNewsSamsung Plans Further Reduction in Memory Chip Production to Mitigate Losses

Samsung Plans Further Reduction in Memory Chip Production to Mitigate Losses

Samsung Device Solutions (DS), the division responsible for the profitable chip production business, experienced its first quarterly loss in over a decade during the first quarter of this year. Unfortunately, the outlook for the remainder of the year remains bleak, prompting Samsung to take drastic measures to cut production.

The operational loss in Q1 amounted to KRW 4.6 trillion, a figure that was slightly mitigated to KRW 4.36 trillion in Q2. Analysts predict that the loss for Q3 is expected to reach approximately KRW 4.0 trillion ($2.95 billion), according to Kim Dong-won from KB Securities.

Other analysts offer slightly more optimistic estimates for Q3, with forecasts ranging from KRW 3.7 trillion by Kim Kwang-jin from Hanwha Investment & Securities to KRW 3.6 trillion by Greg Roh from Hyundai Motor Securities.

During the first half of the year, Samsung already reduced the production of DRAM chips by 20% and NAND flash chips by 30%. Kim Dong-won expects these cuts to increase to 30% and 40%, respectively, in the second half of the year.

Samsung Plans Further Reduction in Memory Chip Production to Mitigate Losses
Samsung Plans Further Reduction in Memory Chip Production to Mitigate Losses

The primary issue driving these cutbacks is the persistently low demand for chips, exacerbated by actions taken by Samsung’s competitors SK hynix and Micron Technology, who also reduced production last year. This oversupply of chips is expected to persist for some time until supply and demand align.

The DS division’s memory business has long been described as Samsung’s “cash cow.” In Q2 of this year, it contributed KRW 14.73 trillion to the total revenue of KRW 60.01 trillion. Comparing this to last year’s Q2, the division contributed KRW 28.5 trillion to the total revenue of KRW 77.2 trillion and posted an operating profit of KRW 9.98 trillion.

To add to the challenges, Samsung Device Solutions is currently in the process of launching a new production line at the Pyeongtaek Campus, which is contributing to the current losses alongside the downturn in demand.

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