Korean chipmakers take action to cope with weak chip industry

Double data rate 5 (DDR5) [Source : Samsung Electronics]

South Korea’s major chipmakers Samsung Electronics Co. and SK hynix Inc. are taking full-fledged action to manage inventories and maintain profits amid continued downturn in chip industry.

According to multiple sources from the chip industry on Tuesday, Samsung Electronics has launched efforts to optimize its production line since late last year such as by rearranging facilities and equipment. The move is aimed at balancing production to cope with an oversupply in the market.

The top chipmaker also plans to establish a production plan that focuses on new products like double data rate 5 (DDR5), high bandwidth memory (HBM), and graphics DDR 6 (GDDR6), which is aimed at increasing production of high value-added items with strong demand while reducing that of generic products to manage overall inventory.

Executives of device solutions (DS) at Samsung Electronics are known to have met with officials in the investment market and delivered its plan related to supply adjustment.

SK hynix has also recently reduced production of wafers for domestic facilities by 10 percent. Experts noted that the move signals a production cut.

The company had previously announced that it would cut production of low profitable products and rearrange product mix and equipment to balance supply and demand and cope with the rapidly changing environment.

NAND flash [Source : SK hynix]

The move in particular is spotted more in the NAND flash memory sector.

Samsung Electronics is considering a plan to relocate some of its cleanrooms for NAND flash production to other divisions including System LSI.

SK hynix is also slowing down the process of introducing new equipment for the expansion of its Cheongju factory in North Chungcheong Province that produces NAND flash memory chips.

The move comes as the chipmakers find it imperative to maintain operating profit.

Hyundai Motor Securities Co. expected Samsung Electronics’ inventory asset to be 47.6 trillion won ($38.5 billion) last year, up 15 percent from the previous year.

Ebest Investment Securities Co. also expected SK hynix’s inventory asset at 17.3 trillion won in 2022, nearly doubling from 8.9 trillion won in the previous year.

Slow inventory flow, in the meantime, has worsened corporate cash flow. Samsung Electronics is said to have reported weaker-than-expected operating income for the fourth quarter due to losses from valuation of inventories.