According to the giant chipmaker, a sluggish global economy and decreased demand following Covid had caused significant sales declines.
Samsung said primer numbers showed working benefits fell 600 billion won (£366m) in January-Walk, from 14 trillion won the earlier year.
Despite the decision to slow chip production, the company’s stock rose by more than 4%.
The South Korean tech giant stated, “We are lowering the production of memory chips by a meaningful level, especially that of products with supply secured.”
Interest for memory chips inclined up during Coronavirus prompted lockdowns as purchasers purchased new gadgets to use at home.
The business is presently recuperating from a chip deficiency over the recent years, however numerous semiconductor producers are battling to track down a harmony between their inventories and current interest.
“The demand for these finished goods suddenly slowed when the economy as a whole slowed down. According to Bain & Company analyst Peter Hanbury, “the makers of these end products therefore stopped ordering chips and focused on selling through the inventory they already had.”
He continued, “This resulted in a strong ‘bullwhip’ effect for semiconductor manufacturers further back in the supply chain, where sky-high demand during the chip shortage suddenly dried up.”
Samsung, the largest smartphone, tablet, and television manufacturer in the world, had opposed the move to reduce memory chip production in comparison to its rivals.
According to analysts, the company rarely announces production cuts. It announced plans to develop a massive semiconductor hub in South Korea last month, investing 300 trillion won over 20 years.
According to Dylan Patel, chief analyst at SemiAnalysis, “Samsung faces a double whammy of DRAM and NAND [memory chips] losing money and needing to update the process technology their [factories’] use due to falling behind over the last couple of years.”
Investors believe that Samsung’s announcement indicates a recovering semiconductor market.
“We anticipate that this inventory “digestion” phase will be finished within three to six months. According to Peter Hanbury, “the end markets will have worked through their inventory at that point and returned to a more normal purchasing pattern.”
In the later part of this month, the business is expected to announce its full earnings.
Samsung’s decision to cut chip production is likely due to a combination of factors, including the global chip shortage, decreased demand for certain products, and increased competition from other chip manufacturers. The profit plunge may be a result of these factors, as well as other internal or external issues within the company.
It is important to note that fluctuations in profits and production are a normal part of any business cycle, and companies may adjust their strategies in response to changing market conditions. Samsung has a long history of innovation and success, and it is likely that they will continue to adapt and evolve in response to the challenges they face.
Samsung will put money into a huge chip-making plan in South Korea.
Electronics goliath Samsung says it intends to contribute around 300tn won ($230.8bn; £189.6bn) north of 20 years in the South Korea government’s push to foster a super semiconductor center point in the country.
According to the company’s statement, this will be used to build five chip factories.
Samsung is the largest manufacturer of memory chips, smartphones, and televisions worldwide.
Companies in the high-tech sector will be able to take advantage of incentives like increased tax breaks and support for infrastructure under the official plan.
In a statement released on Wednesday, the Ministry of Trade, Industry, and Energy of South Korea stated, “The mega cluster will be the key base of our semiconductor ecosystem.”
It stated that it intended to “leap forward as a leading country in the middle of fierce global competition over advanced industries” and secure approximately 550 trillion won in private sector investment.
According to Paul Triolo of the global advisory firm Albright Stonebridge Group, “major players are ramping up efforts to boost onshore manufacturing in the semiconductor sector,” South Korea’s move comes at this time.
“It needs to copy somewhat Taiwan’s bunching impact, where the trifecta of science parks… structure an enormous group that has drawn in various different organizations, both upstream and downstream in the store network,” he said.
The US and China are at odds over semiconductors, which are at the heart of everything from mobile phones to military hardware.
In October, Washington reported that it would require licenses for organizations trading chips to China utilizing US apparatuses or programming, regardless of where they are made on the planet.
The Netherlands announced last week that it would also restrict exports of its “most advanced” microchip technology to safeguard national security.
At the same time, concerns about the US policy regarding semiconductors were voiced by the trade ministry of South Korea.
“could deepen business uncertainties, violate companies’ management and technology rights, and make the United States less attractive as an investment option,” the ministry stated of the Chips Act.
As a response to Washington’s export restrictions, China has frequently referred to the United States as a “tech hegemony.”
SK Hynix and other major microprocessor manufacturers are based in South Korea.
Samsung chip production
In 2021, Samsung is one of the world’s largest producers of semiconductors, including memory chips and processors. Samsung’s chip production plays a crucial role in the global technology industry, as its chips are used in a wide range of electronic devices, from smartphones and tablets to servers and data centers.
Samsung has invested heavily in research and development to stay ahead of its competitors in the chip industry. The company has also made significant investments in advanced manufacturing technologies, such as EUV lithography, to improve the efficiency and quality of its chip production processes.
Samsung’s chip production has faced challenges in recent years, including the global chip shortage and increased competition from other chip manufacturers. However, the company has continued to invest in its chip business and is expected to remain a major player in the industry for the foreseeable future.