April 10, 2023: On Friday, Samsung Electronics said it would make a “meaningful” cut to chip production, after the lead of tiny rivals, as it grapples with a sharp international downturn in semiconductor demand that has increased costs.

The unusual output cut by the biggest memory chipmaker in the world with no last announcement recalled by Samsung officials and analysts came following it flagged a worse-than-anticipated 96% plunge in first-quarter profit.

Investors brushed off the profit miss, which bets the move by the industry leader would help chip costs that had decreased by 70% more than the previous nine months.

Samsung impressed 4.5% in early trading in the most significant one-day rise since September, while rival SK Hynix’s shares surged 5.6%.

Smartphone and personal computer engineers had stocked up on chips during the pandemic when demand for consumer gadgets surged. Still, they run down inventories as shoppers slash back on purchases between the increasing inflation.

Samsung said memory demand had decreased sharply because of a weak global economy and customers reducing purchases as they used up their stocks.

“We are decreasing the production of memory chips by a meaningful level,  that of products with supply secured,” it added around those with sufficient inventories.

Samsung did not say the size of the planned production slash, but it sent a definite signal for a firm that had previously said it would make minor adjustments, such as stops for refurbishing production statement but not a full-blown slash.

“The statement that the No. 1 market share company is joining production cuts lifted. SK Hynix and Micron have shown production cuts, but Samsung has not, so the market was witnessing it,” said John Park, an analyst at Daishin Securities.

“Today’s production slashes signal a positive outlook for a memory chip rebound in the year’s second half.”

Although slashing short-term production, Samsung said it was still making long-term investments and infrastructure research to secure needed clean rooms for chip displays and expand its technological lead.