Seoul (Reuters) Samsung Electronics said on Friday it would make a “significant” cut in chip production after posting a 96% slump in its worse-than-expected quarterly operating profit amid a sharp decline in the global semiconductor market. drivers gets worse.
Shares of the world’s largest memory chip and TV maker rose 3% in early trading, while shares of rival SK Hynix jumped 5% as investors welcomed plans to cut production to help preserve pricing power.
Samsung (SSNLF) 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. This is the lowest profit of any quarter in 14 years.
“Memory demand has fallen sharply … due to the macroeconomic situation and slowing customer buying sentiment, as many customers continue to adjust inventory for financial gain,” he said in the communicated.
“We are reducing memory chip production by a significant level, especially of products with secure supply,” he added, referring to those with sufficient inventory.
The signal to cut production is unusually strong for Samsung, which previously said it would make small adjustments like pauses to refurbish production lines, but not a full cut.
He did not reveal the size of the planned cut.
First-quarter earnings are lower at Refinitiv SmartEstimate’s 873 billion won, weighted toward analysts who are more consistently accurate. Several estimates were revised down earlier this week.
It was the lowest since a profit of 590 billion won in the first quarter of 2009, according to company data.
With consumer demand for tech devices sluggish due to rising inflation, semiconductor buyers, including data center operators and makers of smartphones and personal computers, are holding back. ‘buy new chips and run out of stock.
Analysts estimated that the chip division suffered quarterly losses of more than 4 trillion won ($3.03 billion) as memory chip prices fell and its inventory values were reduced.
It would be the chip sector’s first quarterly loss since the first quarter of 2009, a major divergence from what is normally a cash cow that generates around half of Samsung’s profits in its best years.
Revenue likely fell 19% from the same period a year earlier to 63 trillion won, Samsung said.
The company is due to release detailed results, including divisional breakdowns, later this month.