Samsung Electronics plans to scale back memory chip production as its operating profit in the first quarter of 2023 is expected to decline by about 96% from the previous year. This will be the South Korean technology giant’s lowest profit since the first quarter of 2009.
The global macroeconomic slowdown, oversupply of memory chips and sluggish demand have negatively impacted earnings, the world’s largest memory chip manufacturer said in its preliminary earnings report on Friday.
“Samsung is adapting to reduce memory production to meaningful levels,” it noted. Samsung claims to be optimizing line operations to secure sufficient memory chip volume for future demand. The technology company added that it will continue to invest in infrastructure and research and development to strengthen its technology leadership in the industry.
Samsung’s quarterly profit from January to March is expected to be 600 billion won ($450 million), down about 95.8% from 14.12 trillion won in the first quarter of 2022. While the company will report its results later will publish this month, data from Bloomberg suggests that analysts expect the company to post quarterly earnings of 1.4 trillion won for the first quarter. Revenue is also expected to fall to 63 trillion won in the first quarter from 77.78 trillion won a year earlier, the company said.
Earlier this year, Samsung said it would not cut its investment in memory chips despite declining demand, hoping to recover the memory chip market in the second half of this year. At the same time, industry peers such as Micron Technology, Kioxia and SK Hynix have reduced their production of memory chips to combat oversupply.
Samsung had the largest market share worldwide 40.7% And 31.4% in DRAM memory chips and NAND flash memory, respectively, in the third quarter of 2022. The price of DRAM and NAND dropped about 20% and 15% in the first quarter of this year, according to a recent report from TrendFroce.
Samsung said last month it would spend about $230 billion (300 trillion won) building five new memory and foundry plants in South Korea over the next two decades — a big move in line with the government’s ambitious goal to to set up a mega semiconductor hub in Yongin, on the outskirts of Seoul.
The company will publish full financial statements at the end of this month, including net profit and profit by sector.