London, UK: In a move that has sent shockwaves through the tech industry, Samsung Electronics has announced that it will be cutting its memory chip production following a staggering 96 percent drop in its quarterly operating profit.
Due to a sluggish global economy and reduced demand following the pandemic, the largest chip manufacturer in the world has reported a significant drop in sales. Samsung has released preliminary figures indicating a drop in operating profits of 600 billion won for the January-March period compared to the previous year, where the company recorded 14 trillion won.
The announcement of Samsung’s decision to reduce chip-making production caused a more than 4 percent increase in the company’s shares. Lockdowns induced by COVID led to an increase in demand for memory chips, as consumers purchased new electronics for home use.
According to analysts, Samsung’s decision to reduce chip production is a rare move. The company announced plans last month to invest 300 trillion won over 20 years in the development of a massive semiconductor hub in South Korea.
Although the industry is currently recovering from a chip shortage experienced over the past few years, several semiconductor manufacturers are facing difficulties finding a balance between their inventories and the current demand.
When compared to its competitors, Samsung, which is the largest producer of televisions, tablets, and smartphones globally, had previously resisted the decision to reduce memory chip production. The announcement by Samsung has raised optimism among investors, who see it as an indication of a potential market recovery in the semiconductor industry. Later this month, the company is expected to release a comprehensive earnings report.
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