Samsung, the global leader in DRAM and NAND flash memory chip production, has issued a warning of lower profits due to falling demand for memory chips, according to a report from The Korea Herald. The tech giant expects to earn just 600 billion won ($455 million) in the first quarter of 2023, a significant drop of 96 percent compared to the same period last year.
The decline in demand for memory chips is seen as a potential red flag for the broader tech industry, as these chips are essential components used in a wide range of consumer devices, including smartphones, laptops, and smartwatches. Samsung has announced plans to cut back on memory chip production to adjust to the lower demand, while also optimizing its line operations.
In a statement, Samsung mentioned that it would continue to invest in clean room infrastructure and expand research and development (R&D) spending, as it anticipates improved demand for memory chips in the mid- to long-term. However, the current oversupply of memory chips indicates a slowdown in demand for consumer electronics, possibly linked to a global economic slowdown.
The drop in demand for memory chips comes after a period of significant growth in the tech industry fueled by the COVID-19 pandemic. Since late 2021, memory prices have sharply declined, with DRAM and NAND prices dropping by 20 and 15 percent, respectively, in just the last quarter alone.
One positive aspect for Samsung has been the sales of its new Galaxy S23 smartphone, which helped mitigate the impact on profits. More details are expected to be revealed in Samsung’s upcoming earnings report, scheduled to be released at the end of April. The company’s decision to cut back on memory chip production reflects the challenges faced by the tech industry amid changing market dynamics and demand trends.
