Samsung to Keep up investing in Chips, Despite Gaining Low Profit for Last Eight Years

Samsung said it has no plans to discontinue investing in chips in 2023 despite its weak downturn in the past eight years. The South Korean company indicated its plans for the continuity of its chip investment program for this year.

The tech industry condemns the worst downturn for chips in over a decade. The guidance leads to an industry trend to cut back on investing and output and raises concerns about the world’s most significant memory chipmaker that plans to make money with a notable profit margin to obtain market share from insignificant peers.

According to Choi Yoo-June – a tech analyst, Samsung may consider this time as an opportunity to enhance market share, which could come in handy at the Micron and SK Hynix expense in the long run. On the other hand, the research head at Hyundai Motor Securities – Greg Roh, said Samsung’s market share might touch the 40% range for DRAM chips in 2023, whereas NAND flash memory chips should have a range of mid-30 percent in the second half of the year.

However, Samsung does not want to cut investment to respond to the decreasing demand and reducing prices; instead, it signaled to curb short-term production by adjusting equipment, moving to modern chipmaking methods, and line maintenance.

Increased Proportion of Capital Investment 

Samsung has reportedly decided to surge the percentage of capital investment for research and development areas. It also noted that the company’s production would go slightly down. Many investors anticipated experiencing a significant cut in the production field, while others commented about a quicker market ricochet to let its shares fall. Accordingly, the market saw Samsung’s share prices fall by 3 percent on Tuesday.

Samsung would spend a capital investment in the following year as it did in 2022. The decision surprisingly goes in contrast with Micron Technology which plans to slash investments this year. Taiwan Semiconductor also announced a spending cut in contract chipmaking.

Samsung Makes Lowest Chip Profit

The South Korean tech giant revealed it made the lowest quarterly profit last year after 2014. Samsung noted that determined macroeconomic vagueness might make the first half of the year hard, but it thinks the demand would begin recovering in the last six months of the year.

The chipmakers may find slow demand and inventory modifications continually impacting their business in the first quarter. Samsung believes the demand for smartphones will reach a year-on-year decline because of the financial slowdown in chief regions.

Samsung made a 3.49b operating profit in the October-December period, which it says is the lowest quarterly profit the company made in the last eight years. Its revenue also dropped eight percent to 70.5 trillion won.

Samsung sees its chip profit tumbling to around 270 billion won, with memory chip prices dropping by double-digit percentages last year. Several analysts think the chip business will see a loss in the first quarter and pull overall profit below the fourth.

The company noted the fourth-quarter profit in the mobile field dropped to 1.7 trillion won from 2021, wherein it made 2.66 trillion in profits. The statistics indicated that low-and mid-range smartphone sales could not make what Samsung expected.