Samsung, SK hynix cut chip production
By Kim Yoo-chul
Samsung Electronics has cut its production of flash-type memory chips used in almost all data-intensive consumer devices as NAND chip prices show no signs of recovery amid oversupply and slowing demand.
``Samsung has cut its chip production by more than 9 percent as demand for chips are expected to remain sluggish. We don’t see a meaningful recovery in demand in the near future,’’ said a senior company official, asking not to be identified.
To offset falling profit in its NAND business, the firm has shifted some of NAND lines to produce more lucrative and profitable non-memory chips.
``Although Samsung is the world’s biggest supplier of NAND chips, it still believes uncertainties over market demand will persist throughout the year. That means Samsung customers such as Apple, Dell and other technology companies will maintain a conservative approach to their inventory strategy,’’ said a senior fund manager from a U.S.-based investment bank in Seoul who manages Samsung stocks.
In the first quarter, Samsung earned $1.86 billion from its NAND business, down from $1.91 billion a year earlier. It increased output for advanced NAND chips but failed to generate the sizable returns it expected.
SK hynix, another top-tier NAND flash chipmaker, has also reduced production. According to sources, the firm has lowered its NAND chip factory rate by 8 percent due to an inventory overflow.
It recently decided to produce both DRAM chips and NAND chips at its previously NAND-designated ``M12’’ line in the provincial city of Cheongju, where its advanced chip line is located.
The Korean firms’ production cuts came after the world’s No. 2 NAND chip producer Toshiba of Japan recently announced an immediate 30 percent cut in its production.
Market experts say the moves by the industry leaders will help the sagging technology sector find new momentum as they could boost chip prices in the foreseeable future.
``So far, production cuts have helped the entire market see a rebound in prices, however, this year will be different. I doubt any recovery will be possible throughout the first half of next year,’’ said the fund manager.