Market crisis is affecting the company, which is the largest in South Korea.
In recent years, due to the Covid-19 pandemic, many companies have been facing financial difficulties, caused by a crisis in the global economy. Because of this, many of these companies have had to make cuts, both in expenses and in their production line, drastically reducing the number of employees and the quantity of products manufactured.
And those who think that only small companies went through the crisis are mistaken. Among the companies that faced problems and are still trying to recover today is Samsung. The South Korean company lost around 96% of its profits, causing billions in losses, and decided to make some cuts in the production of some devices.
But will this decision harm the production of the brand's cell phones? Find out all the details of this company's decision now!
Court
Samsung had already announced, in the first half of this year, that it would make a significant cut in the global production of memory chips, used in different electronic devices, including cell phones and computers.
The company, which is the world's largest maker of such chips, had to make the cuts after a decline in global demand for semiconductors caused the price of the devices to fall. The problem has resulted in the company's profits falling by around 96% in the first quarter of this year alone, to 600 billion won, or about US$$455.5 million. In the same period last year, the company's profit was 14.12 trillion won.
Although the worst of the crisis has already passed, the company has decided to maintain the cuts during the second half of the year. According to the brand, this will be due to the fact that the market recovery has focused on cutting-edge components used for artificial intelligence.
The drop in demand for memory chips is seen as a consequence of the increase caused by the pandemic, as after a while, the demand for components decreased and this put companies' forecasts in check, which ended up motivating cuts in production.
In a statement, Samsung said that production cuts by the industry are expected to continue in the second half of the year and demand is expected to gradually recover as customers continue to reduce their chip inventories. The company did not confirm when chip production will resume normal operations.
Artificial intelligence and market
Samsung hopes that the company will recover thanks to the market boom generated by artificial intelligence in the coming months. The high-performance components segment aimed at artificial intelligence applications should drive market growth and boost the production of the brand's devices. As a result, analysts estimate that the situation should improve from next year onwards.
Cell phones
Despite the losses and difficulties the company faces due to chip manufacturing, smartphone production has not been affected so far. Samsung continues to manufacture and invest more and more in cutting-edge devices, which continue to hit the market and have attracted consumers.
The company even expects its smartphone shipments to increase this quarter and the average selling price to improve in the second half of the year. To this end, the manufacturer launched its fifth generation of smartphones this week. foldable cell phones, to compete with upcoming releases from Apple, which should arrive soon.
Samsung is also studying a lower-cost production option, aiming to gain market share in an increasingly popular foldable phone category, as these types of devices generally have a higher price tag than “conventional” phones.
