Samsung Extend Chip Production Cuts and Focus on High-end AI Chips

Samsung Electronics on Thursday announced that it will continue to cut back its memory chip production including NAND flash used in smartphones and PCs due to being largely constrained to high-end chips used in artificial intelligence (AI).

The company reported a $3.4 billion (4.36 trillion won) operating loss in the second quarter of this year in its memory chip unit.

“Production cuts across the industry are likely to continue in the second half, and demand is expected to gradually recover as clients continue to de-stock their chip inventory,” Samsung, the world’s biggest memory chip maker, said in a statement.

The move comes after Samsung cut off its memory chip production in April after terrible quarterly profit.

Executive vice president of Samsung’s memory business said on an earnings call with analysts, that it would extend its production cuts and make additional output adjustments for certain products including NAND flash memory chips, which are used to store digital data.

Samsung aims to generate a brighter AI picture for the future. The tech company aims to double down on producing high-performance memory chips like high bandwidth memory, (HBM) by 2024 due to robust AI demand. HBM, used in AI, 5G, the Internet of Things (IoT) and graphic processing applications, provides faster data processing and lower power consumption compared to the traditional NAND. 

“Server demand remained weak as customers continued to adjust inventories, but demand for high-density/high-performance products stayed strong, driven by increased investments focusing on AI by major hyperscalers,” the company said.