The chip downturn led to a big jump in the price of storage products in the background, Samsung Electronics’ first quarter results operating profit plummeted 95.8%, and finally, top pressure announced production cuts. This is since the 1998 financial crisis, Samsung after 25 years the first time to develop a formal production reduction program.
According to industry sources cited by South Korea’s JoongAng Daily, Samsung’s production reduction plan focuses on general-purpose products represented by DDR4, and production of its memory product line in Hwaseong City will be cut for three to six months.
Although capacity has increased (through technical production cuts), total wafer input has been reduced by 5-7% compared to the same period in February and March last year, the source said.
Samsung Electronics operates six DRAM production lines in its Hwaseong and Pyungtaek campuses, with general-purpose products such as DDR4 mainly produced in Hwaseong and high-end products such as DDR5 and LPDDR5 mainly produced in Pyungtaek. We will address the oversupply of memory by reducing DDR4-centric production while shifting production to DDR5 and LPDDR5 and increasing the proportion of advanced processes.”
Market research firm TrendForce said in a report in the middle of last month that Samsung’s DRAM production (on 12-inch wafers) will be reduced to 608,000 wafers in the second quarter of this year, a reduction of up to 9.25 percent compared to the previous quarter. With Samsung’s formal announcement of production cuts, this figure is expected to fall further. Industry insiders expect Samsung’s DRAM production will be reduced by 25% to 20% compared to last year.
Samsung Electronics expects operating profit for the first quarter of 2023 to be 600 billion won (currently about RMB 3.132 billion), down 95.8% year-on-year; sales are 63 trillion won (currently about RMB 328.86 billion), down 19% year-on-year. Samsung Electronics said the company will “meaningfully” cut chip production.
Rivals Micron Technology and SK Hynix previously announced sharp cuts in investment plans, and the chip slump is expected to last until at least the second half of 2023.
