Samsung Electronics said it would make a “meaningful” cut to chip production after flagging a worse-than-expected 96% plunge in quarterly operating profit, as a sharp downturn in the global semiconductor market worsens.
Samsung estimated its operating profit fell to $455.5 million in January-March in a short preliminary earnings statement. It was the lowest profit for any quarter in 14 years.
“Memory demand dropped sharply … due to the macroeconomic situation and slowing customer purchasing sentiment, as many customers continue to adjust their inventories for financial purposes,” it said in the statement.
“We are lowering the production of memory chips by a meaningful level, especially that of products with supply secured,” it added, in a reference to those with sufficient inventories.
The production cut signal is unusually strong for Samsung, which previously said it would make small adjustments like pauses for refurbishing production lines but not a full-blown cut.
It did not disclose the size of the planned cut.
With consumer demand for tech devices sluggish due to rising inflation, semiconductor buyers including data center operators and smartphone and personal computer makers are refraining from new chip purchases and using up inventories.
Analysts estimated the chip division sustained quarterly losses of more than $3.03 billion as memory chip prices fell and its inventory values were slashed.
This would be the chip business’ first quarterly loss since the first quarter of 2009, a major divergence for what is normally a cash cow that generates about half of Samsung’s profits in better years.
Revenue likely fell 19% from the same period a year earlier, Samsung said.