Samsung persists with chip production reductions to mitigate Q3 2023 losses

Samsung, the world's largest chipmaker, is planning to continue its chip production cuts into the third quarter of 2023 as part of its strategy to address chip losses. This move follows similar actions taken by industry peers such as SK Hynix Inc. and Micron Technology to tackle the persistent oversupply of chips. 

Samsung persists with chip production reductions to mitigate Q3 2023 losses

Analysts, including Kim Dong-won at KB Securities, anticipate that Samsung's Device Solutions (DS) division, responsible for its chip business, will report losses of approximately 4 trillion won ($2.96 billion) in Q3. This projection represents an improvement compared to the 4.35 trillion won loss recorded in Q2.

The reduction in chip output has been more pronounced in the second half of the year, with DRAM production cuts at 30% and NAND Flash production cuts at 40%, up from 20% and 30%, respectively, in Q1.

In Q1, Samsung's DS division reported an operating loss of 4.6 trillion won, marking its first financial loss in 14 years. This loss was primarily attributed to high chip inventories amidst lower global demand.

Despite these challenges, some analysts are optimistic that Samsung's production cuts, especially the 50% reduction in NAND Flash production, could lead to price increases for their primary products.

However, it's worth noting that increased depreciation costs may pose a challenge, potentially impacting Samsung's chip performance in the third quarter.

Overall, Samsung's efforts to curtail chip production are expected to narrow its chip deficit in Q3, potentially resulting in improved chip prices and demand. The extent of this impact will depend on various factors, including production costs and market dynamics.

New images of Google Pixel Watch 2 have been leakedSmart Watch