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Samsung Slows Memory Chip Production to Keep Prices Stable

According to a Bloomberg report today, Samsung is preparing to decelerate its memory chip production for 2019 in anticipation of a decline in demand. The South Korean manufacturer's move is a double-edged sword as it can either help maintain NAND flash and dynamic random access memory (DRAM) prices or further drive up prices.

(Image credit: Samsung)

At the beginning of this year, Samsung's optimism had it believe that the bit growth for DRAM and NAND would rise 20 percent and 40 percent, respectively in 2018. Bit growth is a term used inside the industry to refer to the amount of memory produced. It's an important metric for measuring demand and allows manufacturers to plan their production.

Samsung's latest forecast looks pretty grim as the company expects DRAM bit growth to rise less than 20 percent and that of NAND to increase 30 percent. So, the logical step for Samsung would be to slow down memory chip production to limit supply, which could result in consequences for consumers. Bloomberg analyst Anthea Lai believes Samsung would prefer a situation where supply is tight and prices are high, rather than gaining more market share and running the risk of lower prices. 

Samsung is currently the world's leading NAND and DRAM manufacturer. The company produces memory chips for smartphones, computers and many other devices. Samsung does not only produce memory chips for its own arsenal of devices, but also sells to other competing smartphone manufacturers. So, it's not hard to see why Samsung takes such great care of its semiconductor business. As a matter of fact, it's easily the most lucrative activity for the South Korean manufacturer. Samsung's chip division alone raked in $31.4 billion in operating income last year, helping drive the company's earnings record to new heights.

So, how does this affect the average consumer? Well, if Samsung decides to go through with its decision to reduce production, chances are that memory prices will continue to stay high in 2019. 

  • Giroro
    Samsung has a long history of being accused of (and found guilty of) price fixing.
    So It should come as no surprise that their future plans for price fixing involves "a lot more price fixing".
    Reply
  • bigdragon
    I just love paying higher prices. It leaves me feeling warm and fuzzy inside to know I'm supporting corporate record or near-record profits. /s
    Reply
  • eye4bear
    Here is a company the President needs to go after with a tariff, instead the poor Walmart shoppers will see prices going up on almost everything they buy as all of it most is imported from China.
    Reply
  • kenjitamura
    Anyone else looking forward to China catching up in the memory fab business? With moves like this I'll probably be much more willing to spend my money on Chinese made RAM over Samsung in the future.
    Reply
  • shrapnel_indie
    21336440 said:
    Here is a company the President needs to go after with a tariff, instead the poor Walmart shoppers will see prices going up on almost everything they buy as all of it most is imported from China.

    You mean the same Walmart that shed it's founder's philosophies and encouraged* companies to move production overseas to China? Note, while Walmart was able to get products sold to them cheaper, their "lower" prices were not significant, or when they were, were designed to damage competitors' sales.



    *encouraged as in proposed it as a way to spike the company's profits AND sell cheaper to Walmart, or in lieu of that, sell said company for a hefty sum to some other company that would do it.
    Reply
  • Co BIY
    At the margins Samsung may be able to reduce production and maintain profits but other competitors will take the chance to build capacity and threaten market share.
    Reply
  • Co BIY
    "Price setting" for their own products and even attempting "price leadership", the case here, are not "price fixing".
    Reply
  • bit_user
    21336440 said:
    Here is a company the President needs to go after with a tariff,
    Do you not see the irony of applying a tariff on a product for being overpriced?

    And these memory chips surely find their way into some Walmart products.

    Tariffs are not a magic bullet. They're only really useful in a few, specific cases. Even then, they should be used with care to avoid sparking trade wars.

    https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act#After_enactment

    At first, the tariff seemed to be a success. According to historian Robert Sobel, "Factory payrolls, construction contracts, and industrial production all increased sharply." However, larger economic problems loomed in the guise of weak banks. When the Creditanstalt of Austria failed in 1931, the global deficiencies of the Smoot-Hawley Tariff became apparent.

    US imports decreased 66% from $4.4 billion (1929) to $1.5 billion (1933), and exports decreased 61% from $5.4 billion to $2.1 billion. GNP fell from $103.1 billion in 1929 to $75.8 billion in 1931 and bottomed out at $55.6 billion in 1933. Imports from Europe decreased from a 1929 high of $1.3 billion to just $390 million during 1932, while US exports to Europe decreased from $2.3 billion in 1929 to $784 million in 1932. Overall, world trade decreased by some 66% between 1929 and 1934.
    Reply
  • bit_user
    21336482 said:
    Anyone else looking forward to China catching up in the memory fab business? With moves like this I'll probably be much more willing to spend my money on Chinese made RAM over Samsung in the future.
    You mean so they can withhold shipments of semiconductors, like they did with rare earth metals, a few years ago? Yes, that's a sword I'd very much like dangling over my head.
    Reply
  • jimmysmitty
    I don't get it. Memory already shot up and instead of letting the market naturally lower the prices they want to make it possibly increase prices? Thats a tad insane.
    Reply