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| Samsung Electronics' clean room at the semiconductor production facility in Hwaseong, Gyeonggi Province / Courtesy of Samsung Electronics |
By Jun Ji-hye
Following the world's second-largest chip maker SK hynix's decision to reduce memory chip production this year, investors and market experts are turning their attention to the largest chip maker, Samsung Electronics.
SK hynix said Thursday it will turn part of its DRAM fabrication line in Icheon, Gyeonggi Province, over to non-memory CMOS image sensor (CIS) lines.
It will reduce DRAM production capacity starting in the fourth quarter, the firm said, adding it also plans to reduce NAND wafer input by more than 15 percent this year, up from its earlier plan to decrease it by 10 percent.
The move comes as the firm's second-quarter operating profit plummeted 89 percent from a year earlier to 637.6 billion won ($589 million) on lower memory chip prices and weak demand, in addition to persisting uncertainties in the global economy.
Samsung Electronics is also expected to announce disappointing earnings for the second quarter, given it stated in its earnings guidance announced on July 5 that its operating profit might have plunged 56 percent from a year earlier.
According to price tracker DRAM eXchange, the DRAM price was $3.31 per unit in June, down from $7.25 in December.
Amid the chip industry downturn, the third-largest memory maker Micron Technology has also announced plans to cut DRAM and NAND flash output.
A Samsung Electronics official said, "There is nothing I can talk about."
Industry analysts said if Samsung joins moves to adjust memory chip production, it will reduce supply in the global market that is dominated by the three companies and this would contribute to curbing the price slump.
"If the chip prices continue to decrease at the current pace, SK hynix and Micron's DRAM business will suffer operating losses within the year, and Samsung Electronics will go into deficit within the first half of next year," Yuanta Securities analyst Lee Jae-yoon said.
"The necessity to cut production capacity will inevitably expand among memory chip makers."
Meritz Securities analyst Kim Seon-woo said the smartphone market has continued to slow, while major clients have delayed the purchase of memory chips for their servers.
"A fall in chip prices has failed to expand demand," Kim said. "To make SK hynix's strategy to adjust production capacity valid, Samsung Electronics will also need to join moves to systematically cut output. Samsung will need to make a bold decision to adjust manufacturing capacity."
But from Samsung's point of view, it would be hard to announce a decision to cut production even if it is necessary as the move would exert enormous pressure on the global IT industry.
If the tech giant joined the moves of the two other major chip makers, it could also possibly provoke a price-fixing controversy.
Samsung, SK hynix and Micron have often been embroiled in price-fixing allegations in the United States, Europe and China.
The Chinese government is investigating the three firms over their alleged involvement in fixing memory chip prices.
