Samsung, the world leader in memory chip production, is cutting back on its production in response to sluggish demand. The company announced on Friday that production volume will be adjusted to a “reasonable level.” The electronics giant also reported its lowest quarterly operating profit in 14 years, with profits from ordinary activities falling by almost 96 percent to 600 billion won (about 417 million euros) in the first quarter of 2023. Sales are expected to decline by 19 percent to 63 trillion won (43.7 billion euros).
The chip industry has been struggling with oversupply and falling prices for some time, and high inflation has further dampened consumer sentiment. However, Samsung remains optimistic about the medium and long term, and investment plans will not be withdrawn. The company will “further invest in the infrastructure to ensure essential clean rooms,” referring to the special manufacturing processes in semiconductor production.
Samsung announced last month that it will invest 300 trillion won ($250.1 billion) over the next 20 years in a new semiconductor industrial complex near the capital Seoul and build its own manufacturing facilities there. The complex will contribute to the government’s plans to build the world’s largest semiconductor site in Gyeonggi Province by 2042.
While production volume will be cut in the short term, demand is expected to pick up again in the near future. Affected by the production cut are products for which there is sufficient inventory to meet customer needs. The extent of the production cut remains unclear.
In conclusion, Samsung’s decision to cut its production follows the global semiconductor industry’s ongoing struggles with oversupply and falling prices. Nonetheless, the company remains committed to its investment plans for the future.
