Korean tech giant Samsung Electronics says it will still have to wield the axe on production costs despite a predicted recovery in chip sales.
Samsung said on Thursday the worst is over for the global memory chip market but added demand recovery is largely constrained to the high-end chips used in artificial intelligence.
The move underscores the unprecedented semiconductor downturn that led the South Korean firm to incur a record 8.9 trillion won ($7 billion) operating loss from its bread-and-butter chip business in the first six months of this year.
The business is likely to remain in the red in the current quarter, although the loss is seen almost halving to 2.3 trillion won from the second quarter, according to 22 analysts polled by Refinitiv.
A global economic slowdown and high interest rates have dampened demand for most consumer goods following a pandemic-driven boom.
“Production cuts across the industry are likely to continue in the second half, and demand is expected to gradually recover as clients continue to destock their [chip] inventory,” Samsung, the world’s biggest memory chip maker, said in a statement.
Jaejune Kim, executive vice president of Samsung’s memory business, said on an earnings call that it would extend production cuts and make additional output adjustments for certain products including NAND flash chips, which are used to store digital data.
He did not disclose the extent of Samsung’s output cuts but noted the company’s memory chip stocks were rapidly decreasing after peaking in May.
The comments eased concerns about chip oversupply and boosted Samsung shares by 2%, while smaller rival SK Hynix’s shares jumped by 9% to the highest level since March 2022.
SK Hynix, which said on Wednesday that it would cut NAND output by a further 5% to 10%, is seen benefiting more from the concerted efforts due to its heavy exposure to those chips.
- Reuters with additional editing by Sean O’Meara