Samsung to focus on high-end chips to improve earnings after disappointing results
Samsung Electronics, the world’s largest memory chip maker, plans to focus on high-end chips and reduce production of less profitable memory chips, in a bid to boost earnings after a disappointing performance in the first quarter of 2023.
The company, which is also the world’s biggest smartphone maker, saw its operating profit plunge 95.5% in the first quarter, its lowest level in more than a decade, as weak demand for semiconductors and smartphones led to a steep decline in sales.
Samsung’s earnings are heavily reliant on the memory chip market, and the company has been struggling with oversupply and falling prices for months. However, the company is betting that focusing on high-end chips used in servers, data centers and artificial intelligence (AI) applications will help it improve its margins and profitability.
“In memory, we will focus on increasing our sales of high-end products such as DDR5 and HBM3 and will strengthen our competitiveness in high-density products, such as multi-chip packages (MCPs), by enhancing the capabilities of our packaging technologies,” Samsung said in its first-quarter earnings release.
The South Korean tech giant said it would also “adjust our memory production capacity and shipments, actively managing inventory” to align supply with demand.
The shift to high-end chips could benefit Samsung in the long run, but analysts cautioned that it will take time for the company to realize any significant improvement in its earnings. They also warned that the global economy remains uncertain, with geopolitical tensions, inflation and potential recession continuing to weigh on consumer and business spending.
“The demand environment for semiconductors is still uncertain, but we believe that the focus on high-end products is the right move for Samsung,” said Lee Seung-woo, an analyst at Eugene Investment & Securities. “The high-end memory market is growing rapidly and is less affected by fluctuations in consumer spending.”
In addition to memory chips, Samsung is also focusing on its foundry business, which manufactures chips for other companies, including Qualcomm and NVIDIA. The foundry business has become a key growth driver for Samsung in recent years and the company is aiming to capture a larger share of the market, which is dominated by Taiwan Semiconductor Manufacturing Company (TSMC).
Samsung is also investing heavily in research and development (R&D) of advanced technologies such as artificial intelligence (AI), 5G, and the Internet of Things (IoT). The company hopes that these investments will help it to remain competitive in the long term.
“Samsung is committed to making long-term investments in our R&D, facilities, and technology, and to ensure our competitiveness in key growth areas such as AI, 5G, and IoT,” Samsung said.
The company’s decision to focus on high-end chips and other key growth areas is a strategic shift that could determine its future success. While the company faces challenges in the short term, its long-term vision of leading in innovation and advanced technology is likely to guide its actions in the years to come.
