South Korean tech behemoth Samsung Electronics is persistently trimming down its memory chip production that includes NAND flash utilized in smartphones and PCs. This move follows a reported operating shortfall of approximately $3.4 billion in its memory chip division during 2023's Q2. There has been a cumulative operational loss of around $7 billion in its semiconductor business over the last six months, making it a challenging period for the world's largest memory chip manufacturer.
Earlier in April, the tech giant substantially curtailed its memory chip production, responding to the least quarterly profits since 2009. The consumer device demand remains frail, compelling Samsung to make strategic adjustments in its production lines.
Despite these setbacks, Samsung envisions a more promising future riding on the artificial intelligence (AI) wave. It disclosed plans to double its production of high-performance memory chips, like High Bandwidth Memory (HBM), by 2024 owing to surging AI demand. The HBM features lower power consumption and swifter data processing as compared to traditional NAND and finds increasing usage in applications pertaining to AI, 5G, the Internet of Things (IoT), and graphic processing.
According to Samsung, the server demand continues to lag as the customers are still regulating their inventories. Nevertheless, high-density/high-performance products have witnessed robust demand driven by critical investments in AI by major hyperscalers.
During a recent earnings call, Jaejune Kim, the Exeuctive Vice President of Samsung's memory division, stated they intend to persist with the memory chip production cuts, and adjust depending on specific products. However, the firm will enhance its high-performance memory chip manufacturing capacities, including HBM, as the demand for these advanced memory chips is projected to grow incessantly.
Memory chips, namely DRAM and NAND, find widespread applications across devices ranging from smartphones to servers located at data centers. Large language models like Open AI’s ChatGPT have DRAM memory to perform sophisticated functions. DRAM aids multitasking and builds intricate AI applications by speeding up data processing, whilst NAND helps in data storage.
Meanwhile, Samsung has envisaged launching 2-nanometer production for mobile phone components by 2025 as part of its foundry business strategy.
On last Thursday, Samsung released its Q2 revenues for 2023, where its companywide operational profits stood at an approximate of $524 million, down from $10.88 billion from the previous year. These figures surpassed the preliminary report expectations shared earlier by Samsung, wherein it projected a 96% plunge in its Q2 operating profits, estimating it to be around $459 million.
Despite recording a 95% dip in operating profits for Q2, Samsung remains optimistic about a gradual recovery of the global demand for memory chips in the latter half of the year. However, the company also acknowledged that potential macroeconomic challenges could pose significant hurdles in resurrecting the demand.