The world’s largest manufacturer of chips reported a steep decline in sales due to weak demand after Covid and a slowing global economy.
According to Samsung, early data indicates that operating profits decreased from 14 trillion won in January through March to 600 billion won (£366 million).
Despite the decision to delay chip production, the company’s shares increased by more than 4%.
The South Korean tech titan claimed, “We are meaningfully reducing the manufacture of memory chips, especially that of items with supply secured.”
As people purchased new electronics for use at home during Covid-induced lockdowns, the demand for memory chips increased.
The world’s largest manufacturer of chips reported a steep decline in sales due to weak demand after Covid and a slowing global economy.
The chip crisis of recent years is finally over, but many semiconductor producers are still having trouble striking a balance between their inventory and current demand.
“The demand for these finished goods abruptly decreased as the general economy slowed. So, the producers of these finished goods stopped buying chips and concentrated on selling through their existing inventory “says business consulting firm Bain & Company analyst Peter Hanbury.
For semiconductor manufacturers farther down the supply chain, where demand was at an all-time high during the chip shortage, “this had a powerful ‘bullwhip’ effect,” the author continued.
Experts claim it is unusual for the corporation to declare a reduction in production. A month ago, It announced intentions to invest 300 trillion won over a 20-year period in the construction of South Korea’s largest semiconductor cluster.
“Samsung confronts a double whammy of losing money on DRAM and NAND [memory chips] and needing to modernize the process technology their [factories] use owing to lagging over the last couple of years,” said Dylan Patel, head analyst at SemiAnalysis.
Investors believe Samsung’s announcement is a precursor to a semiconductor market revival.
“During the following 3-6 months, we anticipate this inventory’s “digestion” phase to be finished. When that time comes, the end markets will have used up all of their inventories and be back to a more regular buying pattern “Peter Hanbury stated.
Later this month, the corporation is expected to reveal specific financial information.
