Samsung's Bold Move: Trimming Memory Chip Production

Samsung's Bold Move: Trimming Memory Chip Production

It's unfortunate that Samsung Device Solutions (DS), the division responsible for chip production, has posted its first quarterly loss since 2009 in the first quarter of this year. This is indicative of the challenging times faced by the semiconductor industry. Here's a summary of the information you provided:

1. Q1 Operating Loss: In the first quarter, Samsung DS reported an operating loss of KRW 4.6 trillion. This is a significant financial setback.

2. Q2 Loss: The loss in the second quarter (Q2) decreased slightly to KRW 4.36 trillion, but the division is still operating at a substantial loss.

3. Q3 Projections: Analyst Kim Dong-won from KB Securities predicts that the loss for the third quarter (Q3) will be around KRW 4.0 trillion, which is approximately $2.95 billion.

4. Varied Forecasts: Other analysts have provided slightly more optimistic forecasts for Q3. Kim Kwang-jin from Hanwha Investment & Securities predicts a loss of KRW 3.7 trillion, and Greg Roh from Hyundai Motor Securities expects a loss of KRW 3.6 trillion.

5. Production Cuts: In response to these challenging market conditions, Samsung has been reducing its chip production. In the first half of the year, production of DRAM chips was cut by 20%, and NAND flash chips by 30%. These cuts are expected to increase to 30% for DRAM chips and 40% for NAND flash chips in the second half of the year.

The semiconductor industry is highly competitive and can be influenced by various market factors, which may contribute to Samsung DS's financial difficulties. It will be important for the company to adapt to these challenges and find ways to remain competitive in the ever-evolving semiconductor market. 

Samsung's Bold Move: Trimming Memory Chip Production

The issue is low demand for chips – Samsung rivals SK hynix and Micron Technology already reduced production last year. There is still an oversupply of chips and it will take a while for supply and demand to even out.

The memory business run by the DS division is described as Samsung’s “cash cow”. In Q2 this year it brought in KRW 14.73 trillion of the total KRW 60.01 trillion in revenues. Looking back at last year’s Q2, the divison brought in KRW 28.5 trillion of the total KRW 77.2 trillion in revenue and posted an operating profit of KRW 9.98 trillion.

Samsung Device Solutions is currently working on getting a new production line at the Pyeongtaek Campus up and running, which is another reason for the current losses in addition to the demand slump