Samsung eyeing 25% cut in chip production: analysts

An aerial view of Samsung Electronics' semiconductor complex in Hwaseong, Gyeonggi Province. (Samsung Electronics)

Samsung Electronics is expected to cut its memory chip production by up to 25 percent in an effort to ease inventory woes, according to analysts on Sunday.

The projection comes after the world’s largest memory chip maker hinted on an earnings call last week that it would start cutting production of legacy products for which it had already secured sufficient inventory to meet mid- to long-term demand. At the time, the company did not specify the reduction scale.

Following the announcement, local analysts offered their own estimates ranging from 15 percent to 25 percent.

Daishin Securities analyst Wi Min‑bok predicted that the reduction level could be between 20 and 25 percent in the first half of this year compared to the same period a year ago.

KB Securities estimated that Samsung’s NAND flash production in the April-June period will decrease by 15 percent on-year, while DRAM production will drop by more than 20 percent starting from the third quarter.

Samsung Securities analyst Hwang Min-seong forecast that more cuts could be carried out if the ongoing reduction fails to lower the tech giant’s inventory level sufficiently.

Industry sources believe that Samsung is cutting down production on low-cost DRAM modules, such as DDR3 and DDR4, amid low demand, while focusing more resources on advanced memory chips like DDR5.

According to market tracker Omdia, the global market share of DDR3 chips stood at 3 percent last year. The figure is expected to drop to 2 percent this year and some 1 percent from 2025.

The market share of DDR4 is also rapidly decreasing after the release of DDR5. It accounted for 56 percent of the DRAM market until last year, but that is expected to drop to 36 and 23 percent, respectively, for this year and next year.

DDR5 penetration, on the other hand, is forecast to lead the DRAM chipset market as fourth-generation Intel Xeon scalable processors, Sapphire Rapids, went into mass production last year. The latest DRAM is expected to take up about 52 percent of the market in 2027 from 3 percent last year, the data showed.

Despite Samsung’s additional production cut announcement, there are still no signs of a full-fledged recovery in the global chip market. DRAM prices went south in April, boding ill for the chip industry down the road, according to market tracker DRAMeXchange.

The average contract price of 8-gigabit DDR4 DRAM came to $1.45 on the spot market Friday, down nearly 19.9 percent from a month prior. After falling sharply by 18.1 percent in January this year, DRAM prices maintained a similar level in February and March and started falling at a steeper rate again.

Taiwan’s market research firm TrendForce said that prices will continue to plunge by 15-20 percent on-quarter in the second quarter as suppliers still struggle with high levels of inventory.

By Jie Ye-eun(yeeun@heraldcorp.com)