Samsung to cut investment in chips

By Kim Yoo-chul

Samsung Electronics plans to cut investment in semiconductors by up to 20 percent next year to prevent further falls in chip prices.

Most of its spending cuts will be focused on DRAM memory chips, sources who are directly involved with the matter told The Korea Times, Thursday.

“Samsung has no plans to build new chip factories next year. The company’s top priority next year is to gain more profits rather than expand volume,” one source said.

Its spending on memory chips may fall below 8 trillion won from this year’s estimated 10 trillion won, he said.

Separately, IHS, a market research firm, expects Samsung to cut its spending on semiconductors including memory and logic chips to $13 billion next year down from $14 billion this year.

“Samsung Electronics, SK hynix and Micron Technology are behaving far more rationally than in the past,” said Bernstein Research’s Mark C. Newman. “We show DRAM chips moving back to 1 percent undersupply in 2016 as the smartphone inventory issue resolves itself. Even if the inventory drag persists longer (and growth does not pick up), we project a more balanced situation next year due to limited supply growth.”

Mentioning the steep fall in DRAM chip prices that threatens the bottom line of manufacturers, the sources said Samsung is worried over its worsening profit margin.

The contract price for a DDR3 PC DRAM chip fell to $2.06 in August from $3.94 in December 2013 said dramexchange, a research firm which tracks moves of chip prices.

“With Samsung planning to cut its chip investment next year, SK hynix and Micron Technology of the United States are expected to follow similar steps to keep memory prices from falling,” another source said.

Another positive sign for Samsung is that Apple is working on developing its A10 processor chips to be used in the next iPhones and iPads with Samsung supplying chips that are 14-nanometer thick for iPhones, said Srini Sundararajan at Summit Research in the United States.