Samsung cuts contract chip production by up to 50% due to low demand

The speculations of some sources about the deplorable state of affairs at Samsung Electronics in the field of contract manufacturing of chips were not clearly reflected in the quarterly report, but The Chosun Daily now reports that the company is preparing to temporarily stop up to 50% of its production lines in South Korea by the end of the year. contract manufacturing of chips.

Image Source: Samsung Electronics

This will be done to reduce costs in conditions of not very high demand for Samsung’s core services. Previously, about 30% of the lines specializing in the production of 7nm, 5nm and 3nm chips at the company’s enterprises in Pyeongtaek, South Korea, were temporarily suspended, but by the end of the year this share is planned to increase to 50%, according to the source. The shutdown will be carried out gradually without affecting the fulfillment of orders from existing customers.

Samsung has not yet received large orders, and fixed costs need to be reduced. For this purpose, some of the lightly loaded production lines can be stopped. This is more effective, as the company’s management decided, than “spreading orders evenly across all available production lines.” It is better to stop some of them, and concentrate existing orders on the remaining ones, ensuring their higher load.

As noted, Samsung was counting on Chinese customers to load its lines for the production of 4-nm and 5-nm chips in South Korea, but their demand was lower than expected. Some Chinese developers are now waiting for the outcome of the US presidential election to understand where to place orders for the production of their chips, and whether sanctions will be tightened under the new president. Such steps by Samsung, according to some experts, will further lag the company behind rival TSMC.