Samsung warns of declining memory chip demand and adjusts business

Sam­sung Elec­tron­ics announced that it will sig­nif­i­cant­ly reduce its prof­it fore­cast and low­er mem­o­ry chip pro­duc­tion in response to falling demand. The com­pa­ny expects oper­at­ing prof­it to drop 96% year over year to just $ 455 mil­lion in the first quar­ter of 2023.

This points to a broad­er slow­down in the tech indus­try as demand for mem­o­ry chips declines.

In a state­ment, Sam­sung said it is “opti­miz­ing our pro­duc­tion lines and reduc­ing mem­o­ry chip out­put” in addi­tion to its ongo­ing restruc­tur­ing efforts. While demand is expect­ed to recov­er in the medi­um to long term, Sam­sung said it will con­tin­ue to invest in clean­room infra­struc­ture and increase R&D spending.

Sam­sung accounts for 40.7% and 31.4% of the glob­al DRAM and NAND flash mem­o­ry chip mar­kets, respec­tive­ly. These chips are used in all kinds of con­sumer elec­tron­ics, from smart­watch­es to phones and laptops. 

Excess sup­ply of mem­o­ry chips sug­gests demand for these devices has fall­en sig­nif­i­cant­ly amid a slow­down in the glob­al economy.

The slow­down comes after the tech indus­try’s biggest boom in his­to­ry, fueled by the COVID-19 pan­dem­ic. How­ev­er, mem­o­ry chip prices have been declin­ing since late 2021, with DRAM and NAND prices down 20% and 15% respec­tive­ly in the last quarter. 

On a pos­i­tive note for Sam­sung, ini­tial sales of its new Galaxy S23 smart­phone should help sup­port prof­its. Sam­sung is sched­uled to announce detailed earn­ings lat­er this month.