On August 1, south Korean media reported that samsung electronics has made it clear that it will not cut production of storage semiconductor devices such as DRAM.Samsung, meanwhile, said it was difficult to assess the impact of Japan's export restrictions on its semiconductor business, but pledged to use various measures to minimize the damage.

Previously, there have been reports that the current memory spot price has begun to rise.But the global semiconductor market will continue to cool this year, falling 9.6 per cent to $429bn, according to research groups.Meanwhile, prices of memory-chip products have fallen by more than 40%, and the glut is likely to continue into the second quarter of next year.

Perhaps that's why samsung has had several reversals this year in its approach to factory construction.In march, samsung said it would not cut back on investment because of the market downturn, but four months later it was reported that samsung had delayed the construction of its pyeongtaek plant in South Korea to q2-3.

However, on July 31, samsung also officially announced that the xi 'an plant in China will be completed by the end of this year, and the pyeongtaek plant in South Korea will be completed next year.As for other manufacturing operations, samsung said a planned EUV production line at the gyeonggi city plant in South Korea would begin production in the first half of 2020.An additional 7nm EUV line and an image sensor line (S4) will also be built.In addition, samsung electronics laboratories are evaluating the EUV process for 1z(10nm)DRAM production.

Samsung electronics executives have also said the company is not considering cutting back on its investment in wafers at the moment, but rather operating production lines flexibly based on demand.Faced with the current state of storage semiconductor inventories in the second half of the year, the executive said: 'inventories will decline in the second half of the year, but it is difficult to predict how fast because of the uncertainty of the external environment.''NAND flash inventories have started to plummet and are expected to reach the right level in the third quarter,' the executive added.

In fact, the current spot price fluctuations have limited impact on the overall market, since most DRAM products are in contract orders.The contract price for DDR4 8GB DRAM, which is mainly used in personal computers, fell 11.2% from $3.31 last month to an average price of $2.94, according to a recent report by research companies.It has fallen for seven consecutive months since the start of the year, unchanged from June 2016.That's down 64 percent from $8.19 last September, when DRAM prices peaked last year.

Meanwhile, with demand growth slowing in the peak season of the smartphone market in the third quarter, growth of more than 10% in the previous quarter is unlikely to return, and total smartphone production is expected to decline by 5% year on year this year.Moreover, the inventory level of the original factory is still high, so the contract price of DRAN will probably be reduced by 10% in the third quarter. Although DRAM prices have increased by 24% in July, it is not enough to reverse this trend.

So why doesn't samsung continue to slow down DARM production, instead continuing to invest heavily in DRAM?If you look back in history, samsung's approach has long been well documented.The most recent were in 2007 and 2008.

Figures show that in 2007 and 2008, miscalculations about the number of copies of Microsoft's Vista operating system, combined with the fact that Vista was so memory-hungry, led many manufacturers to conclude that DRAM demand would soar.However, Vista failed to sell, leading to a severe oversupply of DRAM chips (Q3 global 12-inch DRAM fabs increased production by 56% from Q1 2007 to 2008, while 57% of 8-inch fabs stopped production). The price dropped sharply, forcing manufacturers to stop production and reduce production.Coupled with the impact of the 2008 global financial crisis, the global economy has become more sluggish, and many DRAM companies have been moribund.

However, samsung made a surprising move at this time. It invested 118% of the total profit of samsung electronics in the DRAM expansion business in 2007. Meanwhile, the government provided a blood transfusion to protect against the loss of DRAM price.The effect was immediate, with DRAM prices quickly falling below cash costs and then below material costs, adding to the woes of others already struggling in the DRAM market.

Qimonda, the third-ranked German manufacturer, was the first to declare bankruptcy. Then in early 2012, erpida, the Japanese manufacturer, was forced to quit.The entire DRAM market players only samsung, SK hynix, micron, and samsung rely on the practice of this hurt, finally to secure their storage semiconductor leader.

If manufacturers want to ensure that their profits do not suffer too much, the usual course of action is clearly to cut production, reduce inventories and rebalance the market.But this time, samsung said it is not cutting back on production of memory semiconductors such as DRAM, which is clearly not in its best interests.

As a result, samsung is likely to use counter-cyclical weapons again to squeeze out other players in the DRAM market.At present, Japan and South Korea dispute, although the surface looks very bad on the south, but in the end, Japan will just want to South Korea from the list of preferential out, rather than completely embargo against South Korea, South Korea imported from Japan so critical materials cycle will reach 90 days or so, what's more, it is now the world has been actively looking for the Japanese semiconductor raw materials import channels.

So in the long run, samsung's DRAM materials won't be much of a distraction.Samsung, by contrast, is building DRAM lines as other manufacturers cut production, allowing it to slowly chip away at DRAM market share, a repeat of 2008.

For domestic DRAM manufacturers, samsung's move will probably aggravate the current situation of oversupply in the market and further squeeze the living space of domestic manufacturers.Fortunately, at present, some domestic enterprises have consciously adopted domestic brands, which should be left to domestic enterprises in part of the market.(coordinating editor: Andy)