Samsung Electronics Co. Ltd, one of the largest chip manufacturers worldwide, has no plans to cut its investment in semiconductors despite recently reporting its lowest quarterly profit since 2009.
The Korean electronics giant is also not shying away from investment with looming economic concerns globally, geopolitical issues in Europe and Asia, and rising inflation, according to a news report from Reuters.
Samsung reported is profits falling tremendously from a year earlier in the same quarter due to memory chip prices falling by double-digit percentages in 2022. However, Samsung said its capital spending in 2023 would be similar to 2022.
Why it matters
After dealing with a multi-year long semiconductor shortage, the sharp and sudden downturn in demand has led to a surge in voluntary layoffs in the tech sector as well as cuts in spending on tech products and services. This, combined with consumer spending on discretionary goods falling, has many companies worrying about the future of demand and profits.
Samsung’s decision to continue its capital investment bucks a scaling back trend from other memory and semiconductor makers. For example, both memory makers SK Hynix and Micron Technology announced they would slash investment in capital spending after the memory tumble in 2022. But it isn’t just the memory makers cutting back as Taiwan Semiconductor Manufacturing Co. (TMSC) also announced it would be cutting its spending.
Samsung signaled it would curb short-term production organically through line maintenance, equipment adjustment and moving to advanced chipmaking processes. This would be instead of cutting investment due to demand slowdown and falling prices. But Samsung would also increase the proportion of capital investment that goes into research and development.
Samsung’s decision to not decrease investments may bode badly for other memory makers if the company leans on its deep pockets and superior profit margins to gain market share over its competitors in the memory segment.