Samsung to make “meaningful” cut to chip production

Whilst there was an increase in demand for chips during COVID as people purchased new electronics to utilise at home, there is now a global downturn in demand that has seen prices drop.

Several semiconductor manufacturers are facing difficulties in maintaining equilibrium between their stock levels and the current demand.

Samsung, in particular, has said that sales had dropped sharply due to a slow global economy and less demand after COVID.

"We are lowering the production of memory chips by a meaningful level, especially that of products with supply secured," the company said.

In January-March, Samsung reported a 600 billion won (£366m) decline in operating profits compared to the previous year's 14 trillion won, according to preliminary figures.

Even though the firm decided to slow chip-making, its shares increased by over 4%.

"Samsung faces a double whammy of DRAM and NAND [memory chips] losing money and needing to update the process technology their [factories] use due to falling behind over the last couple of years," Dylan Patel, Chief Analyst at SemiAnalysis told the BBC.

Samsung confirmed that despite reducing short-term production, it is continuing to invest in infrastructure and research to ensure access to required clean rooms for chip production and enhance its technological advantage in the long run.

There is optimism among investors that Samsung's announcement indicates a resurgence of the semiconductor industry.

Later this month, the company has plans to disclose comprehensive earnings.