Last week, Samsung announced its Q1 2023 results, and according to the financial report, the company's operating profit fell by an alarming 95% compared to the same period last year. The Korean giant said that the decline in demand for memory chips was one of the main reasons that contributed to the lackluster financial results, while also hinting that it intends to reduce production of memory modules to ease inventory problems. Samsung did not reveal how much production volume it plans to cut. However, experts predict that it will be around 25%.
Semiconductor analyst at Daishin Securities, Minbok Wi, predicts that Samsung could reduce its memory chip production by roughly 1% to 2023% in the first half of 20 compared to the first half of 25. KB Securities estimates that in on a year-over-year basis from Q2022 3, Samsung will cut production of NAND flash chips by 2023% and DRAM chips by more than 15%. Min Seong Hwang, an analyst at Samsung Securities, is of the opinion that the company could proceed with even more production cuts if there is no noticeable reduction in inventory levels.
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Samsung appears to have enough stockpiles of memory chips to meet mid- to long-term demand, and plans to cut back on older products are also part of its plans. However, it did not specify the specific types of memory chips that would be affected by the measure. According to The Korea Herald, Samsung will reduce production of low-cost DRAM modules such as DDR3 and DDR4 due to falling demand and focus more on advanced DDR5 memory chips, which are more popular.
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On Friday, the average contract price of 8GB of DDR4 RAM was recorded at US$1,45, representing a nearly 20% drop from the previous month, with prices already down 18,1% in January. Although February and March were marked by stable development, we are now seeing downward trends again, despite the announcement of Samsung's intention to reduce production. According to TrendForce, prices will fall another 2-2023% in Q15 20 as suppliers struggle with high inventory levels. Although things do not look very favorable for Samsung at the moment and relief is not expected in the near future, analysts predict that the situation in the chip industry could turn around significantly in 2024.
