Samsung Electronics, the leading technology company from South Korea, recently announced a staggering 95% drop in operating profit for Q1 2023, compared to the same period last year. The significant decline was attributed to the reduced demand for memory chips, leading to Samsung’s decision to cut production by around 25%.
Analysts’ Predictions for Samsung’s Memory Chip Production
Although Samsung did not disclose the exact reduction in memory module production, industry analysts predict a cut of around 20% to 25% in the first half of 2023, compared to the same period last year. Additionally, KB Securities predicts that Samsung will reduce NAND flash chip production by 15% and DRAM chip production by over 20%, starting in Q3 2023. Meanwhile, Samsung Securities’ analyst, Min Seong Hwang, believes that the company may need to further reduce production if inventory levels do not decrease as expected.
Samsung’s Plan for Memory Chip Production
Samsung stated that it has sufficient inventory of memory chips to meet mid to long-term demand and plans to reduce the production of legacy products. However, Samsung has not specified which memory chips will see a decrease in production. According to reports, the company plans to cut production of low-cost DRAM modules like DDR3 and DDR4, due to their dwindling demand, and instead focus its efforts on advanced memory chips like DDR5, which are rapidly gaining popularity.
Market Trends and Future Outlook
Recent market trends have not been favorable for Samsung, with the average contract price of an 8GB DDR4 RAM module falling by 19.9% last month, following an 18.1% drop in January. Although prices stabilized in February and March, they have begun to fall once again, despite Samsung’s announcement of a production cut. Market research firm TrendForce predicts a further 15% to 20% drop in prices during Q2 2023 as suppliers grapple with high inventory levels.
Despite the current bleak outlook for Samsung and the chip industry, some analysts remain optimistic, suggesting that a turnaround could be on the horizon in 2024. Samsung’s decision to focus on next-generation technologies like DDR5, which are gaining traction, could position the company well for a recovery in the coming years.
