Chip industry in crisis: Samsung wants to maintain production – to the detriment of the competition

On January 31, Samsung held the Announcing the results of the past quarter At which the company, on appeal from the Financial Times and Bloomberg, decided not to cut its production and investment plans for the current year even in the event of falling prices and to continue with the expenditure of 2022. The reason given is that it makes sense to invest even in times of downturn in order to be able to gain market share when demand picks up again. Meanwhile, the chip industry is in a critical phase of the downturn, so many companies in the semiconductor sector are opting for the counter-proposal to Samsung.

Samsung is causing trouble for the competition

According to the Financial Times, the South Koreans are also struggling with falling revenues, which is also related to the fact that Samsung has sold fewer smartphones. The company also expects a drop in demand for mobile phones this year. Chipmakers are currently struggling with an oversupply crisis as increasing demand during pandemic times is now faced with the opposite effect caused by high inflation and rising interest rates.

However, Samsung’s plans come to the chagrin of the smaller semiconductor competitors SK Hynix (South Korea), Micron (USA) and Kioxia (Japan), which are less diversified than Samsung and have announced that they will put the brakes on investment in memory production, as Bloomberg and the Financial Times reports. You would be faced with the same demand situation as Samsung, but the weight class is known to be different, while the market leader is not contributing to price stabilization by sticking to production.

Also interesting: Austerity course: Intel cancels Mega-Lab for 700 million US dollars

Commenting on Samsung’s move, Daniel Kim of financial firm Macquarie said: “Their inventories are becoming larger than expected as customers are not buying chips despite lower prices. This is delaying any price recovery. Given the extent of the chip price decline and losses, the current downturn could be worse than 2008.” Furthermore, Daniel Kim explains that the NAND business posted losses in the fourth quarter. This is expected to continue in the current quarter, including for DRAM, as chip prices will fall below production costs.

Semiconductor giant Intel also had a devastating quarter, its latest report revealed. It is feared that the chip manufacturer will even be in the red in Q1 2023. According to research firm Gartner, the global memory chip sector saw sales drop 10 percent in 2022. Samsung remained the overall semiconductor market leader with a 10.9 percent global share, followed by Intel with 9.7 percent and SK Hynix with 6 percent.

Source: Financial Times, Bloomberg