Samsung Electronics has announced its intention to reduce the production of memory chips.

Source: Pixabay.com

This intention is because the company expects that by the end of the first quarter of this year, its operating profit will decrease by about 96% compared to the result of a year ago. The expected profit, if the forecast turns out to be correct, will be the lowest for the South Korean tech giant since the first quarter of 2019.

In the preliminary earnings report, the company indicates that the global downturn in macroeconomics, an overabundance of memory chips, and a significant decline in consumer demand harmed profits.

The report also says that Samsung is adapting its production process from the point of view of a quantitative indicator to the current realities. The company announces the optimization of the production line to ensure the volume of memory chips is sufficient to meet future demand.

Samsung also continues to invest in infrastructure development and maintains high rates of research and development of new products. This activity is necessary for the company to remain one of the industry leaders.

Preliminary forecasts state that Samsung’s profit for the first three months of this year will amount to 600 billion won ($ 450 million). During the same period last year, the company made a profit of 14.12 trillion won ($10 billion). Many experts expected that by the end of the first three months of 2023, the technology giant would make a bigger profit.

Samsung at the beginning of 2023 announced no intentions to reduce the production of memory chips amid a reduction in consumer demand for these products. At the same time, the company announced its hope for the recovery of the memory chip market in the second quarter of this year.

Micron Technology, Kioxia, and SK Hynix have reduced the volume of production of these products, fearing an oversupply.

In the third quarter of 2022, Samsung held the largest share of the global market for DRAM and NAND flash memory chips – 40.7% and 31.4%, respectively. DRAM and NAND prices dropped by about 20% and 15% in the first quarter of this year.

Last month, Samsung announced its intention to spend 300 trillion won (about $ 230 billion) to build five new factories for the production of memory microchips and launch a foundry in South Korea over the next 20 years. These plans are consistent with the government’s desire to create a mega-semiconductor center in Yongin, on the outskirts of Seoul.

The company plans to publish a full financial report at the end of April. This document will contain information on net profit and income by sector.

As we have reported earlier, Samsung and Naver to Partner on Mobile Payments in South Korea.