Samsung Electronics Announces First Memory Chip Production Cut Since 1998 to Stabilize Prices and Promote Industry Recovery

Samsung Electronics, a South Korean tech giant, has announced a reduction in production for its memory chip division, marking the first time since 1998. While the extent of the cut has not been disclosed, experts believe that this move will stabilize chip prices and promote the semiconductor industry's path to recovery.

This news has stimulated a 4% surge in Samsung Electronics' stock price on April 7th, followed by an additional 1% rise on April 10th to reach a new high since early June last year, with a closing price of KRW 65,700.

According to a recent report by Subin Lee, an analyst at Galaxy-Union Securities (CGS-CIMB), Samsung Electronics' DRAM production could decrease by 3% this year, leading to a 6% reduction in semiconductor capacity. However, the production cut is expected to support chip prices. As a result, the average selling prices for Samsung Electronics' DRAM and NAND chips are now predicted to fall by 49% and 51%, respectively, instead of the original estimates of 60% and 56%. Lee maintains a buy rating and a target price of KRW 80,000 for Samsung Electronics.

Some experts anticipate that the production cut by Samsung Electronics will contribute to the recovery of the chip industry. While it may not result in an immediate V-shaped recovery in the second quarter, the likelihood of a gradual U-shaped recovery in the second half of the year will increase.

Ahn Ki-hyun, Executive Vice President of the Korea Semiconductor Industry Association (KSIA), stated that Samsung Electronics is expected to see results three months after the production cut. He pointed out that the effects of the production cuts announced by the second-largest memory chip maker SK Hynix and the third-largest Micron Technology last year have emerged this year. Therefore, it is expected that the impact of Samsung Electronics, a leading player in the industry, will appear in the second half of the year.