Samsung will maintain its manufacturing cuts to reduce chip losses

The South Korean tech company is dedicated to continuing with the cost-effective measures in an effort to reduce chip losses. According to some recent pieces of information, the company will reduce production in Q3 2023. Earlier this year, Samsung, SK Hynix Inc., and Micron Technology decided to cut down on production. Notably, this strategy was adopted to deal with supply issues.

The Device Solution division of Samsung is considered a cash cow division for the company. According to analyst Kim Dong-won at KB Securities, the company can face KRW 4 trillion (roughly $2.96 billion) in losses in the third quarter of this year. Well, these figures are less than the KWR of 4.35 trillion reported in the second quarter of the current year. Kim also mentioned that Samsung raised its reductions in chip manufacturing during the second half to 40% for NAND Flash and 30% for DRAM, respectively, compared to 20% and 30% in Q1 2023.

In the first quarter of the current fiscal year, the DS division of the company incurred an operating loss of KRW 4.6 trillion. Reportedly, it was the first financial loss in 14 years. In addition to the lower global demand, the main reason behind the losses was the major chip inventories. In Q1 2009, Samsung reported a loss. According to the head of research at Hyundai Motor Securities, Greg Roh, Samsung has benefited a little from the production cut strategy. The profits generated by the company were all used for the production of a new chip facility at Samsung’s Pyeongtaek Campus.

According to Trendforce (via Yonhap News Agency), Samsung made a significant decision to reduce NAND Flash output by 50% in order to address the persistently weak demand. According to Trendforce, this is likely to have a knock-on impact that could result in a price increase for their core items.