With the current outlook in the industry, most players in the memory chip ecosystem are gradually tapering their expectations as it concerns profitability, but are now more focused on survival.
The constraints in the memory chip manufacturing industry have been heightened remarkably with a reduction in the demand from consumers globally. As a result of the bearish outlook, more companies operating in the industry are beginning to see their earnings, and survivability threatened.
According to a Bloomberg report, the expectations from the industry have not materialized much as many believed the emergence of new markets including 5G and cloud services will help push earnings upward. In sharp contrast to this expectation, the earnings have plunged and most of the major firms operating in the space have clogged warehouses filled with products that have not been demanded by consumers yet.
“The chip industry thought that suppliers would have better control,” said Avril Wu, senior research vice president at TrendForce. “This recession has proved everyone was wrong.”
Many chip manufacturers are not exploring avenues to combat this worrying trend and one of the ways they are doing this is by cutting investment in research and expenditure. While the heat is an encompassing one, South Korean multinational tech giant and the industry’s biggest player Samsung Electronics Co Ltd (KRX: 005930) chose to take a different approach from the broader market.
Back in 2022, Samsung chose to keep investing in the chip industry in hopes that at the end of the ongoing winter, it would have outpaced its major competitors and onboarded its customers as expected. While the downtime in the industry is far from over making it hard to determine whether the company will have the last laugh, the only guarantee remains that the company might be the least impacted amongst its core competitors in the space.
At the time of writing, Samsung shares were down by 2.01% to 63,300 Korean Won, an indication of an encompassing battery in the chip industry.
Memory Chip Industry Players and Survival Strategies
With the current outlook in the industry, most players in the memory chip ecosystem are gradually tapering their expectations as it concerns profitability, but are now more focused on survival.
One of the core avenues by which many are pushing forth this renewed focus is in merger and acquisition as is being pursued by the duo of NAND makers Western Digital Corp (NASDAQ: WDC) and Kioxia Holdings Corp. With both firms jointly producing their products at this time, the expectation is that the merger, if completed, will not disrupt any productive engagement.
In all, the players in the space are reducing their supply until market conditions get better following projections of overall consolidation in the near term.
“The NAND market continues to face tough competition, and the recovery will be followed by a quarter of the recovery in the DRAM market,” said Xin Jinho, co-CEO of Midas International Asset Management. “Eventually, we are going to see consolidation in the NAND market if the position goes long.”
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
