Samsung plans to continue cutting production after losing $7 billion on chips in the first half of the year

August 03, 2023

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Samsung Electronics said on Thursday that the worst was over for the global memory chip market, but still announced plans to extend production cuts. The move highlights the unprecedented semiconductor market downturn that left the South Korean company with a record Won8.9tn ($7bn) operating loss at its main chip business in the first six months of the year.

Although losses almost halved from the second quarter to Won2.3tn, the business is likely to remain in the red this quarter, according to 22 analysts at Refinitiv.
Clearly, the global economic slowdown and high interest rates have dampened demand for most consumer goods after the pandemic driven boom.
Samsung

Samsung, the world's largest maker of memory chips, said in a statement that "industry-wide production cuts are likely to continue in the second half, and demand is expected to gradually recover as customers continue to destock." The company on Thursday reported an 85 per cent drop in net profit to Won1.55tn for the quarter ending in June.

Jaejune Kim, executive vice president of Samsung's memory business, said on an earnings call that it would expand production cuts and make additional production adjustments for certain products, including NAND flash chips used to store digital data.

Korea

He did not disclose the extent of Samsung's production cuts, but noted that the company's inventory of memory chips is rapidly diminishing after peaking in May.
The comments eased concerns about chip oversupply, and the good news sent Samsung shares up 2 percent. Shares of SK Hynix, another South Korean memory chip maker, also rose 9 percent to their highest level since March 2022.
SK Hynix said on Wednesday it would further cut NAND production by 5 to 10 percent, and the market widely believes the company will benefit more from the efforts to cut output because of its heavy exposure to these chips.
Lee Min-hee, a researcher at BNK Investment & Securities, said, "The main reason for SK Hynix's loss of nearly 2 trillion won in a single quarter is the decline in NAND chip prices and the shrinking profit space. So the new supply cuts may stabilize NAND prices. This is very good news for SK Hynix."

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