Samsung Electronics Semiconductor Business Operations Target Profitability With 50 Percent Margin Rule
Samsung Electronics aims to reach profitability through its complete semiconductor business operations. Samsung Electronics has established its semiconductor division (DS) to pursue one specific objective which requires them to achieve more than 50% operating profit margins. The technology giant is stopping its market share expansion plans because their business performance has remained weak throughout the early part of 2023. The company has transitioned to a new business model that focuses on high value products while discontinuing all products which fail to meet minimum profit requirements.
The 50% Rule Trimming the Fat
Samsung has decided to concentrate its production and sales efforts on products which can achieve the 50% profit margin according to industry experts who find this decision both unusual and necessary. The company will reduce or remove any product which fails to achieve that profit benchmark. The current memory supply situation faces difficulties because of the ongoing supercycle which AI technology demands.
The company currently conducts its operations with its latest 10nm class sixth generation (1c) DRAM technology according to a particular strategic decision. Samsung successfully manages High Bandwidth Memory (HBM) yields despite AI era demand which has made HBM a popular term.
- Server DRAM Focus Current server DRAM already exceeds 50% profit margins according to market data. Samsung Street maintains this priority according to their stable yields which will enhance their direct cash collection capabilities.
- HBM Yield Challenges The company currently achieves 60% yield for its 1c DRAM product which falls below the standard stable range of 80 90%. HBM production will experience reductions until the company achieves stable HBM yields which bring in better profits compared to other memory products.
Samsung extends its focus beyond DRAM because the company accelerates its complete transition across all areas to optimize every wafer usage.
- NAND Flash The industry currently shifts production operations to focus exclusively on 8th generation (V8) and 9th generation (V9) NAND production. They are aggressively moving away from older, less profitable generations to capture the high end SSD market.
The organization directs its operations toward 4nm, 5nm, and 8nm manufacturing processes. These nodes will produce stable yields which ensure the organization will achieve profitable outcomes. The 2nm process will be used to develop future technologies instead of generating immediate profits for the company.
Samsung operates their business under this marketing strategy while all competing brands use their own strategies to gain customer interest. Samsung currently trails behind SK Hynix who competes directly with them. Samsung's semiconductor profit margin reached approximately 37% during Q4 last year while SK Hynix achieved more than 58% profit margin. Samsung plans to reach this profit target for 2025 through their commitment to developing profitable products which include server DRAM and next generation NAND.
Memory prices will stay elevated during the upcoming period. Samsung will restrict its output to the sectors which yield maximum profits resulting in decreased availability of budget memory products for personal computers and smartphones. Samsung aims to maximize its chip production output during the AI infrastructure expansion period which shows no signs of declining demand.
