Samsung warns of lower profits amid falling demand for memory chips

Samsung has warned of plummeting profits and plans to cut back on memory chip production in response to falling demand, The Korea Herald has reported. It expects to earn just 600 billion won ($455 million) for the first quarter of 2023, a drop of 96 percent from the same period last year. It blamed falling demand for memory chips, a situation that could be a bad sign for the tech industry as a whole. 

“We’re adjusting to lower memory production to a meaningful level… in addition to optimizing line operations that are already underway,” Samsung said in a statement. It added that it would continue to invest in clean room infrastructure and expand R&D spending, as it sees improved memory chip demand in the mid- to long-term. 

Although it trails Taiwan’s TSMC in other areas, Samsung is the global leader in DRAM and NAND flash memory chip production with 40.7 and 31.4 percent shares respectively. Such chips are used in consumer devices of all kinds, ranging from smartwatches to mobile phones and laptops. The oversupply of memory chips is therefore a sign that demand for such products has fallen significantly due to an ongoing global economic slowdown. 

The slowdown comes just a short time after one of the biggest tech industry booms of all time, powered by the COVID-19 pandemic. Since late in 2021, however, memory prices have dropped through the floor, with DRAM and NAND prices down by 20 and 15 percent in just the last quarter alone. One bright spot for Samsung has been sales of its new Galaxy S23 smartphone, which helped bolster profits, the company said. It will reveal more details in its earnings report set to drop at the end of April. 

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