Samsung, the world’s largest chip manufacturer, will continue chip production cuts in the 3rd quarter of 2023 to reduce losses in this area. The company began reducing chip production earlier this year, following in the footsteps of peers SK Hynix and Micron to address ongoing oversupply.

Production cuts will continue

Analyst Kim Dong-won of KB Securities expects Samsung’s Device Solutions (DS) division, which manages its chip business, to post a loss of about 4 trillion won ($2.96 billion) in the third quarter, compared to the 4.35 trillion won in the second quarter. Won ($3.2 billion) in losses, but still far from the desired level.

Samsung has now increased its DRAM cuts and NAND Flash cuts to 30 percent and 40 percent, from 20 percent and 30 percent respectively in the first quarter. Samsung’s DS division reported an operating loss of $3.4 billion in the first quarter, suffering its first financial loss in 14 years. This was mainly due to high chip inventories due to low global demand. There is still an oversupply of chips and it looks like it will take some time for supply and demand to equalize.

The memory business run by the DS division provides Samsung with a significant cash infusion. In the second quarter of this year, $10.85 billion of the total revenue of $44.2 billion was obtained from this department. Looking at the second quarter of last year, the division generated $56.9 billion in revenue and $7.35 billion in operating profit. Meanwhile, Samsung Device Solutions is currently working to get a new production line up and running at its Pyeongtaek Campus, which is another reason for the current losses in addition to the drop in demand. On the other hand, it is also said that production cuts will eventually increase memory prices.