Samsung Electronics is revamping its strategy amid growing competition from Chinese memory chipmakers and contract manufacturers. Chinese rivals are rapidly gaining ground in areas not subject to U.S. sanctions, such as legacy chips used in automobiles, aircraft, home appliances, and consumer electronics. By the third quarter of this year, Samsung’s performance had taken a hit from weaker-than-expected memory chip demand, an outcome the company had long feared.
Vice President Jun Young-Hyun, the head of Samsung’s Device Solutions (DS) Division, is responding to these challenges with a workforce and organizational restructuring before the end of the year. The company plans to scale back production of legacy DRAM and 8-inch foundry segment, areas where Chinese rivals are ramping up output.
South Korea’s leading memory chipmaker is effectively shifting its mid-to-long-term strategy by winding down production lines and reducing the workforce in these older sectors while focusing on higher-value, advanced front-end processes.
Samsung has lowered the utilization rates at its 13 and 15 DRAM chip production lines in Hwaseong, Gyeonggi Province, according to sources familiar with the matter on Nov. 5. These facilities, which produce legacy chips such as DDR4 DRAM, were running at nearly full capacity as recently as August.
“The Hwaseong 13 and 15 lines handle various products, including DRAM, but the company recently lowered the utilization rate of the older DRAM lines and is moving toward front-end production,” said a Samsung spokesperson. The company has reportedly begun preliminary shutdowns to replace outdated machinery with equipment for advanced manufacturing processes.
The company’s foundry division, which is in charge of contract manufacturing, is also adjusting course by reassigning workers from the 8-inch foundry line at its production facility in Giheung, Gyeonggi, where utilization rates have also been significantly lowered. Market research firm TrendForce projects that Samsung’s 8-inch wafer foundry utilization rate could drop to around 50% next year. “The 8-inch foundry utilization rate at Samsung has been falling since the latter half of this year,” TrendForce noted.
Vice President Jun has repeatedly emphasized “streamlining unprofitable businesses” and is addressing the company’s worse-than-expected third-quarter earnings by reorganizing DRAM and foundry production. During its third-quarter earnings call last month, Samsung acknowledged for the first time that the company’s profitability has taken a hit due to the influx of Chinese DRAM.
SK Hynix, the country’s second-largest memory chipmaker, also indirectly mentioned the pressures posed by increased Chinese DRAM supply. “We expect the recent rise in Chinese legacy DRAM chips to negatively affect sales in related areas,” the company said during its recent earnings call. “However, the advanced LPDDR5 DRAM market is different, with varying trends across segments, and it will take time for competitors to catch up with high-performance DDR5 and LPDDR5 products.”
