The operating revenues of the company slumped to 600 billion won in January to March from 14 trillion won the preceding year
The South Korean global electronics giant Samsung has now decided to reduce production of memory chips after the company witnessed a 96 percent decline in quarterly operating revenue. As the demand for memory chips dropped significantly after Covid and the slow pace of the international economy has spearheaded the slow sales, claims Samsung.
Media reports highlighted that operating revenues of the company slumped to 600 billion won in January to March from 14 trillion won the preceding year. But the point to be noted is that although Samsung opted to slow chip production, shares escalated to more than 4 percent. The company spokesperson told the media, “We are lowering the production of memory chips by a meaningful level, especially that of products with supply secured.”
When the lockdown was imposed, the demand for consumer electronics soared, which ultimately boosted the demand for memory chips. Slowly the industry is now recovering from the chip shortage scenario, but the chip-makers are in the midst of a grave challenge to find an accurate balance between the existing demand and their inventories.
Peter Hanbury, analyst at management consultancy Bain & Company told BBC, "When the overall economy slowed down, suddenly the demand for these end products slowed. So, the makers of these end products stopped ordering chips and focused on selling through the inventory they already had. This led to a strong 'bullwhip' effect for semiconductor makers further back in the supply chain, where sky-high demand during the chip shortage suddenly dried up."
Samsung, one of the globe’s biggest manufacturers of home appliances, had actually fought against the strategy to reduce manufacturing of memory chips compared to its rivals. According to research experts, Samsung rarely announces to reduce production and for instance, the company proclaimed to invest 300 trillion won for the coming 20 years to construct a huge semiconductor hub in South Korea. The investment announcement is a sign of market recuperation in the semiconductor sector globally.
