Why is Samsung’s cut in chip production good news for industry?

Image Source: bloomberg.com

Samsung's pledge to cut memory chip production has lifted shares of rival manufacturers.

Samsung took this step as its sales dropped sharply and it flagged a 96% drop in first-quarter profits.

SK Hynix and Micron Technology of the US have also reduced production.

Smartphone and personal computer makers ramped up purchases of chips during the Covid-19 pandemic.

Samsung said demand had dropped because of a weaker world economy and companies buying fewer chips as they run down their inventories.

Samsung estimated its operating profit fell to 600bn won between January and March, from 14.12tn won a year earlier.

Analysts are forecasting a record loss of 2.1tn won in the quarter.

Despite the cut, Samsung said it would continue to invest in infrastructure and research.

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