Samsung Electronics, the world’s largest memory chip maker, has announced that the worst is over for the global memory chip market. However, the company plans to extend production cuts due to the demand recovery being primarily limited to high-end chips used in artificial intelligence (AI).
The semiconductor downturn has been unprecedented, leading to a record 8.9 trillion won ($7 billion) operating loss from Samsung’s chip business in the first half of this year.
While a recovery in demand is expected, it is largely constrained to AI-related high-end chips. The company anticipates continuing production cuts in the second half as clients destock their chip inventory.
Jaejune Kim, executive vice president of Samsung’s memory business, confirmed the extension of production cuts and additional output adjustments, particularly for NAND flash chips used for data storage.
The move has eased concerns about chip oversupply and boosted Samsung’s shares by 2%, while its smaller rival, SK Hynix, saw its shares surge by 9%.
SK Hynix, which recently announced additional output cuts for NAND chips, is expected to benefit more from these concerted efforts due to its substantial exposure to these chips.
Samsung’s chip division reported a significant operating loss in the April-June quarter, impacted by the shortage of chips used in AI applications. The company is playing catch-up to SK Hynix in the high-end DRAM chips market.
AI-driven chip demand is driving the recovery to some extent, particularly in high-density chips such as high bandwidth memory (HBM) and premium DDR5 products used in AI applications. Samsung expects to release its own HBM3 chips later this year.
While the broader chip demand recovery is expected next year, AI remains a bright spot in the global tech sector.
For the June quarter, Samsung reported a 95% plunge in operating profit, primarily due to the chip market downturn. However, its mobile business reported a 16% rise in operating profit, and the company expects sales growth in the second half, driven by premium products.
