Samsung's memory chip business has proven to be a veritable cash cow for the company. It's what brought in record profits for Samsung over the last two years straight. However, overall demand for memory chips has fallen and that has significantly dented Samsung's balance sheet.
The company reported its Q4 2018 earnings today. Its operating profit is down 29 percent on the back of lower demand for memory chips, smartphones and OLED panels. It also expects the demand for memory products to remain weak throughout the first half of 2019. The company is now looking to offset that by focusing on areas other than memory chips.
Focusing on non-memory chip products for future growth
Samsung has traditionally made heavy investments in memory semiconductors. Its exceptional DRAM and NAND flash chips have made it a dominant force in the industry. Just yesterday, it announced the industry's first 1TB eUFS 2.1 solution for smartphones. This means that we'll be getting a Galaxy S10 model with 1 terabyte of internal storage. Let that sink in for a moment.
The company does need to offset the earnings loss from the decline in demand for memory products. Samsung heir Lee Jae-yong has said that the company will now focus more on non-memory chip and foundry business to fuel further growth. This means Samsung will try to win more customers to make chips for and will bring other innovative semiconductor solutions to market for the Internet of Things, 5G, automobiles and more.
Lee's remarks came following his meeting with the floor leader of Korea's ruling Democratic Party, Hong Young-pyo, at Samsung's Hwaseong production facility. “There have been always crises, but we will overcome them through consistent innovation,” he said. Korean chipmakers like Samsung tend to be weaker in the non-memory chip segment compared to their US and European rivals. It seems like Samsung wants to address that in order to offset the decline in its memory chip business.
