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.

Credit: SamsungCredit: 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. 

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  • 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".
  • 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
  • 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.