Things are not going very well at Samsung
For Samsung, one of the world's largest technology brands, things in the chip market do not seem to be going very well.
In the continually fluctuating realm of chip production, Samsung, a pre-eminent global chipmaker, has strategically been reducing its chip output from earlier this year, a maneuver adopted to curtail its chip losses amidst an ongoing supply excess. Notably, the reduction in chip production follows the footsteps of other industry giants like SK Hynix Inc. and Micron Technology, which have also engaged in similar practices, intending to address the consistent supply surplus plaguing the market.
Analyzed projections from Kim Dong-won, an analyst at KB Securities, highlight an intriguing fiscal narrative for Samsung’s Device Solutions (DS) division, which supervises its chip business. A forecasted loss of approximately 4 trillion won ($2.96 billion) in Q3 is under the spotlight, which is marginally lower than the 4.35 trillion won loss registered in Q2. This predicament emanates from Samsung's intensified chip production cuts implemented in the second half of the year. DRAM cuts have soared to 30%, and NAND Flash cuts have been ramped up to 40%, a significant increase from 20% and 30% respectively, in Q1.
Things are not going very well at Samsung
The DS division disclosed an operating loss of 4.6 trillion won in Q1, marking its inaugural financial loss in a span of 14 years, a scenario primarily attributed to elevated chip inventories in the midst of dwindling global demand. Nevertheless, a silver lining might be on the horizon. Some industry watchers posit that Samsung's particular production cuts, especially the substantial 50% cut for NAND Flash, could potentially instigate a ripple effect, leading to a surge in the pricing of their primary products.
Conversely, skepticism persists among some analysts, hinting that Samsung’s chip performance may not meet expectations in the upcoming third quarter, potentially due to spiraling depreciation costs. Thus, while the efforts to slash chip production are slated to alleviate Samsung’s chip deficit in Q3 and possibly pave the way for fortified chip prices and demand, the repercussions may oscillate, subject to production costs and the ever-dynamic market conditions.
Samsung persists with chip production reductions to mitigate Q3 2023 lossesMobile
