Samsung slows memory chip production to keep prices stable

Semiconductor vendor is preparing to decelerate its memory chip production for 2019

Samsung was expecting bit growth for DRAM and NAND would rise 20% and 40%, respectively in 2018.
Samsung was expecting bit growth for DRAM and NAND would rise 20% and 40%, respectively in 2018.

Semiconductor vendor 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.

At the beginning of 2018, Samsung's optimism had the company believe that the bit growth for DRAM and NAND would rise 20% and 40%, 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.

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Samsung's latest forecast look pretty grim as the company expects DRAM bit growth to rise less than 20% and NAND to increase 30%.

Anthea Lai, analyst at Bloomberg, said 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 electronic devices.

"Samsung does not only produce memory chips for its own arsenal of devices, but also sells to other competing smartphone manufacturers," Lai said.

Samsung's chip division alone raked in $31.4bn in operating income last year, helping drive the company's earnings record to new heights.

If Samsung's plan goes through with its decision to reduce production, memory prices will stay high in 2019.

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