According to Bloomberg on January 31, Samsung unexpectedly made a radical decision to maintain its capital expenditure at the same level as last year.

Chipmakers have been struggling to cope with the historic slump in memory prices, with inventories piling up, forcing prices to fall in double digits, and profit decline forcing Samsung's smaller competitors to cut production and expenditure.

Samsung expects that the recovery of chips will not begin until the second half of this year, while the demand for smart phones may shrink in 2023. However, the company said that it would continue to implement huge capital expenditure on chips, reaching 47.9 trillion won ($39 billion) last year.

An Hyungjin, CEO of Billionfold Asset Management, said: "The market has cut prices ahead of expectations." He added that Samsung's move to stick to its spending pace would hit other smaller chip competitors.

Samsung's share price fell 3.6% on Tuesday, the largest drop in three months. Competitor SK Hynix closed down 2.4%.

Samsung's plan to continue spending during the economic downturn may expand the company's leading edge over smaller competitors, who are reducing spending, but at the cost of reduced profitability.

Samsung's smaller competitors almost generally stopped spending. Micron Technologies, an American memory manufacturer, said it would cut spending on new plants and equipment and cut production. Hynix has also reduced its investment and production capacity, while Japan's Armour Man said it would reduce its production by 30%.

Armor Xia is negotiating with Western Digital Corporation for merger.

The decline in chip prices has eroded Samsung's earnings. In the three months to December, the profit of the key chip division plunged by 97% to 270 billion won, because customers continued to process piles of inventory, and operating profit fell by 69% to 4.3 trillion won, the largest decline in more than 10 years, which was consistent with the company's initial performance earlier this month.

Samsung Watch warned that in the current quarter, revenue may decline, and the factory utilization rate of its OEM chip manufacturing business will also decline.

Jaejune Kim, executive vice president in charge of the company's memory department, said that the business environment "deteriorated significantly in the fourth quarter", but said that the company's position on chip spending remained unchanged.

"Our method of capital expenditure this year is to continue to make necessary infrastructure investment to meet the medium and long-term demand," he said on the earnings conference call. "This year's capital expenditure plan is expected to be similar to last year."

Kim said that the company's production line optimization and equipment layout adjustment will "inevitably" affect the supply, and the pace of memory production will slow down in the coming months.

Jeff Kim, head of KB Securities Research Center, said that the recovery of customer demand would be the key. He said: "At this point, the most important factor is when customers finish digesting inventory."