Samsung Electronics said last week it would make a “significant” cut in chip production after flagging a worse-than-expected 96% drop in quarterly operating profit as a sharp downturn in the global semiconductor market worsens.
Samsung estimated its operating profit fell to 600 billion won ($455.5 million) in January-March from 14.12 trillion won a year earlier, in a brief preliminary earnings statement. It was the lowest profit for any quarter in 14 years. In a statement, the company said:
“Demand for memory has dropped sharply…due to the macroeconomic situation and the downturn in customer buying sentiment as many customers continue to adjust their inventories for financial purposes.”
The production cut signal is exceptionally strong for Samsung, which has previously said it would make small adjustments, such as pauses to revamp production lines, but not a full cut. However, the company did not disclose the size of the planned cut.
Samsung’s first-quarter profit missed a Refinitiv SmartEstimate of 873 billion won, weighted for analysts who are more consistently accurate. It was the lowest since profit of 590 billion won in the first quarter of 2009, according to company data.
With consumer demand for high-tech devices sluggish due to rising inflation, semiconductor buyers, including data center operators and smartphone and personal computer makers, are shunning new chip purchases and running out of stock.
Analysts estimate that Samsung’s chip division has suffered quarterly losses of more than 4 trillion won ($3.03 billion) as prices for memory chips have fallen and their inventory values have been reduced.
Revenue was likely down 19% year-on-year to 63 trillion won, Samsung said. The company is expected to release detailed results, including divisional breakdowns, later this month.
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