According to Yonhap News Agency, Samsung Electronics is expected to reduce the chip deficit in the third quarter, mainly due to the continued reduction of chip production.
KB Securities analyst Kim Dong-won predicted that the Samsung Device Solutions (DS) department, which is responsible for the “cash cow” chip business, will post a loss of about 4 trillion won in the third quarter, down from 4.35 trillion won in the same period last year.
He said that since the second half of the year, Samsung has cut DRAM production from 20% in the first half of the year to 30%, and NAND Flash production cut from 30% in the first half of the year to 40%.
In the first quarter of this year, the Samsung DS department operating loss of 4.6 trillion won ( currently about RMB 24.932 billion), which is also the first time in 14 years that Samsung financial loss.
Kyobo Securities analyst Choi Bo-young said that although production cuts and the dynamic balance between supply and demand have begun to push up the price of memory chips, but will also put pressure on profits.
Kim Kwang-jin, an analyst at Hanwha Investment Securities, predicted that Samsung’s chip results will fall short of market expectations, as the company appears to be taking longer than previously expected to fully recover its chip business. He estimated the DS division’s third-quarter loss at 3.7 trillion won.
Greg Roh, head of research at Hyundai Motor Securities, said the impact of Samsung’s production cuts has been “minimal” so far, and that higher depreciation costs due to the commissioning of a new chip production line in the Pyeongtaek campus have eaten into profits. He also put Samsung’s DS division loss at 3.6 trillion won.
TrendForce, a market statistics organization, said that Samsung’s actions to solve the problem of overcapacity exceeded previous expectations. Samsung has taken a “decisive step” by cutting NAND flash production by 50% in response to continued weak demand, which could help stabilize chip prices and boost demand in the coming months.
TrendForce also added: “Samsung’s drastic production cuts could trigger a chain reaction: prices of its key products could rise.”
