Samsung’s announcement that it will cut production by a “meaningful amount” has been hailed as good for the industry by the electronics press.
Samsung’s move follows a 96% fall in Q1 profits with an estimated $1.6 billion loss for its chip unit.
The decision led to a surge in shares of Micron Technology Inc. and Western Digital Corp. last Monday, with Micron having their greatest single-day increase in more than a year and Western Digital having their best performance in more than two months.
Stifel analyst Brian Chin commented that this move from Samsung is a sign of a brighter future, and may help the industry recover from the “largest memory supply imbalance in decades”. Prices of DRAMs are predicted to decline by 10% in the present quarter, following a 20% decrease in the last three months and a more than 30% decline in the fourth quarter of last year.
The pandemic-induced decrease in demand for consumer electronics, combined with external economic pressures like rising inflation, has put pressure on producers. Samsung was previously hesitant to cut production, attempting to take market share from competitors such as Micron.
In response to Samsung’s announcement, the Global Times, a Chinese state-run English-language newspaper, reported that Samsung had experienced a 95.75 percent drop in operating profit in the first quarter of this year, attributing the decline to U.S. semiconductor policies. The paper cited a “supply-demand imbalance in the global semiconductor industry” as the result of the U.S. effort to “weaponize semiconductor supply chains to keep China in check.” It also noted that while the global recession had contributed to the decline in demand, the fundamental cause was U.S. policy.
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