DRAM and NAND flash memories have contributed to Samsung's historic profitability over the past decade. However, a supply glut and falling prices have turned the tables on Samsung's memory chip fortunes, with the company reporting significant profit declines for several quarters straight.
Things seem to be finally looking up for the company as it now expects the memory chip business to turn a profit in 2024. Samsung has a strategic plan in place to recover the glorious fortunes of its memory chip division.
Samsung will use production cuts to prop up memory chip business
The company is already seeing a recovery in DRAM and NAND flash sales which exceeded internal expectations last year. This highlights improved demand in the market. Samsung is also supporting this with strategic cuts in DRAM and NAND flash memory production.
Samsung has been holding on to significant inventory of its memory products. In a bid to reduce stocks, Samsung only made smaller price increases compared to the competition, allowing the company to sell more chips and increase its utilization rate. It's now expected that Samsung's DRAM utilization rate will increase from 70% in Q4 2023 to 81% in Q1 2024, further rising to 89% by Q2 2024.
Even as prices continue to rise, Samsung expects overall DRAM and NAND flash shipments to decline in Q1 2024 due to seasonality as this is typically a low demand period in the industry. The rise in prices coupled with strategic production cuts is projected to enable Samsung's memory division to turn a profit in the first quarter of this year.
Samsung is also expected to begin production of its HBM3e 24GB memory chips in the first half of this year with the 36GB chips following in the second half. Samsung is also developing HBM4 next-generation chips that are expected to enter mass production in 2026.
