Samsung’s cut in chip production is good news for industry

SAMSUNG Electronics’ pledge to cut memory chip production has lifted shares of rival manufacturers because the move could potentially ease a supply glut that’s hammered prices across the industry.

Samsung said on Friday (Apr 7) it would cut production to a “meaningful level” after reporting its smallest profit in more than a decade. Chipmaker Micron Technology rose about 7 per cent on Monday in New York, while Western Digital gained almost 8 per cent.

The post-pandemic slump in demand for consumer electronics, along with broader economic shocks such as rising inflation, have squeezed producers. Samsung had resisted pulling back on production despite the downturn, in part to take market share from competitors like Micron.

The announcement on Friday “adds light to the tunnel,” Stifel analyst Brian Chin said in a research note. The move may “help turn around the largest memory supply imbalance in decades.”

Prices of DRAMs – a type of memory used to process data – are expected to fall about 10 per cent in the current quarter, according to according to Gilhyun Baik, an analyst at Yuanta Securities. That follows a roughly 20 per cent slide in the previous three months and a more than 30 per cent drop in the fourth quarter of last year. BLOOMBERG