Samsung is the Global Leader as Memory Chips Maker and Second-Largest Contract Chip Maker.
Samsung, the South Korean tech giant, has announced its lowest profit in 14 years for the first quarter of this year, with its chip division incurring heavy losses. The company reported 63.75 trillion won in revenue and 0.64 trillion won in operating profit for the quarter, a decline of 18% and 96%, respectively, from the previous year.
The Device Solutions Division, Samsung’s chip division, saw an operating loss of 4.58 trillion won. The company attributed the performance of its memory chip business to the overall decrease in demand amid an economic slowdown and weakened customer spending. Other memory chip companies, such as SK Hynix and Micron, also reported heavy losses for their latest fiscal quarters due to sluggish demand and oversupply of memory chips.
As a result, all three companies have announced plans to lower their production output. The slowdown in demand for DRAM, which has been consistently in high demand by server customers for years now, has been one of the most significant causes of the downturn. Samsung’s bit growth could not meet its previous guidance for the first quarter, meaning it produced less DRAM than planned. However, the company said it achieved its goal and more for NAND as most products shifted toward higher-density chips, allowing Samsung to sell more premium products.
Besides memory, Samsung’s logic chip businesses also saw weak demand in the quarter. Sales of SoCs, sensors, and display chips all fell while demand for its contract chip production service, or foundry, also dropped.
Samsung predicts that while the recovery in demand for chips in the next quarter will be limited, the market is expected to gradually recover as customer inventories normalize.
In conclusion, Samsung’s heavy loss in its chip division resulted in a drastic fall in operating profits. The overall decrease in demand amid an economic slowdown and weakened customer spending played a significant role in the downturn. While the recovery in demand for chips may be limited in the next quarter, the market is expected to gradually recover as customer inventories normalize.
