June 9, 2023

Dubai Week

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Samsung is cutting memory production as it expects first-quarter profit to drop 96% due to weak demand

SEOUL, April 7 (Yonhap) — Samsung Electronics Co. said Friday it will cut memory output in the short term as its quarterly profit reversed its earlier stance that it would not cut production due to declining demand for chips.

The world’s largest memory chip and smartphone maker earlier in the day estimated its operating profit for the January-March period at about 600 billion won (US$454.9 million), down sharply from 14.12 trillion won last year.

Samsung blamed the poor performance on declining demand for tech devices and adjusting customer inventory.

“We will reasonably adjust memory output for products with sufficient inventory to handle future demand,” the company said in a regulatory filing in an effort to deal with falling prices and oversupply. The company did not explain what that reasonable level would be.

“Even as we adjust our short-term production plan, we will continue to invest in infrastructure and expand research and development spending to enhance our technology leadership, as we expect strong demand in the medium and long term,” the company said.

Samsung’s sales in the first quarter will fall 19 percent to 63 trillion. Net profit data not available.

Operating profit was 16.7 percent below average estimates, according to a survey by Yonhap Infomax, a financial data firm affiliated with Yonhap News Agency.

The tech giant did not release results for all of its business units and will release its final earnings report later.

Samsung’s hardware solutions division, which oversees the chip business, is expected to post a deficit of about 4 trillion won, its first financial loss in 14 years, as excess chip stocks grow at a faster pace as global demand slows, according to analyst estimates. .

Samsung last suffered a major unit deficit in the first quarter of 2009 as the world struggled to emerge from the 2008 financial crisis.

The company expected the global chip market to decline 6% year-on-year to $563 billion, due to a sharp decline in demand, and warned of continued difficult conditions for the rest of the year.

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