While the global chip industry is struggling to make ends meet due to sluggish demand and falling prices, the world’s largest memory chip manufacturer, Samsung Electronics, said it will keep spending at last year’s level. The tech giant also has no plans to seek “artificial cuts” in production to manage its growing stocks, breaking the trend of smaller competitors who have announced cuts in both production and costs this year.

Samsung’s comments during an earnings conference last month immediately caused confusion among media and industry observers: What’s the difference between “natural shrinkage” and “artificial shrinkage”? Isn’t a natural contraction a contraction? How will the company cope with the current excess supply without adjusting production volumes?

While Samsung declined to provide further details, experts say the Korean chipmaker appears to be pursuing a more passive strategy this year, which some call “natural” or “technical” production cuts.

“Cuting production in the semiconductor industry means that the manufacturer literally cuts down on wafer consumption to produce fewer chips,” said Park Jae-gun, professor of electronics at Hanyang University in Seoul.

Referring to Samsung’s plan to adjust equipment layouts and optimize lines, the professor said, “However, when the company does things like line optimization and equipment layout adjustments, production can naturally drop, which slows down the production rate.”

During the conference call, Samsung said: “We will strengthen the maintenance and adjustment of the equipment to ensure the best quality and optimum operation of the production lines, and we will constantly strive for a smooth transition to the most advanced nodes in the future.”

The tech giant also said it will increase the proportion of capital expenditures on research and development this year. According to an industry official who spoke on condition of anonymity, this could mean that Samsung will use the same number of wafers without reducing overall production but without immediately launching or selling products.

“It takes hundreds of steps to manufacture a semiconductor, and the number of these processes should increase for advanced products that require more complex and advanced technologies,” he said. said.

“So when a company decides to produce complex products that take longer to produce, the volume of the product naturally decreases over a given period of time, even if the consumption of wafers is the same,” the official said.

All these estimates are speculation as Samsung has declined to detail its plans. Smaller competitors have openly announced plans to cut both costs and production.

American memory manufacturer Micron Technology said it will cut down on investments and production in new facilities and equipment. South Korean chip maker SK hynix also admits it will cut investment and production, while Kioxia Holdings, a NAND flash memory manufacturer in Japan, is cutting production by 30 percent.

Samsung says it is aware of the public’s interest in the “artificial downsizing” decision, but plans to remain silent on output management.

“Version management is a business decision and can vary from company to company. Other companies may have taken decisions (to reduce production) based on their own interpretation of the current situation. A company representative said that Samsung is looking forward to 2025 and 2026. Samsung added that stakeholders and the public should pay attention to how Samsung makes its decision to continue investing to prepare for the future.

“Issue management decisions should be judged based on an understanding of how the company sees the market outlook, not whether it’s good or bad.”

Experts also say that Samsung, a leading player in the memory chip market, may take a cautious approach to minimize the impact on consumer sentiment.

At the same time, having excess items in stock can also help the company cope with a sudden and unexpected surge in demand, as receipts for an order take about four months to ship, an industry official said on condition of anonymity. For example, in 2020 and 2021, a major downturn in the chip industry was predicted following the COVID-19 pandemic. However, the demand has peaked. Industry representatives emphasize that production cuts cannot be a barometer for assessing a company’s competence and productivity.

“The reduction in production means that the company is storing to meet demand. It doesn’t mean that its products have lost their competitiveness or cannot produce,” he said.

Hanyang University’s Park also said, “Rather than looking at how much a company has cut production, the focus should be on how the company continues to invest to prepare for the future.”