Samsung has decided to cut production of memory chips as their operating profit is expected to drop by 96%. It is the worst quarterly profit since 2009.
Samsung Electronics, the world's largest memory chip maker, is set to cut back on memory chip production.
Its operating profit in the first quarter of 2023 is expected to drop by around 96% compared to the previous year, marking its worst quarterly profit since 2009. The global macroeconomic slowdown, memory chip oversupply, and sluggish demand have hurt the company's profit, causing it to adjust its memory production to a lower level.
Despite the setback, Samsung plans to optimize its line operations to secure enough memory chip volume for future demand and continue investing in infrastructure and R&D to strengthen its tech leadership in the industry. Samsung's quarterly profit from January to March is projected to post 600 billion won ($450 million), falling approximately 95.8% from 14.12 trillion won in Q1 2022.
The company's revenue is also expected to drop to 63 trillion won in the first quarter from 77.78 trillion won a year earlier, the company said. Meanwhile, Samsung's peers, such as Micron Technology, Kioxia, and SK Hynix, have cut their memory chip production to counter oversupply.
Despite dwindling demand, Samsung had decided not to slash its memory chip investment, hoping to recover the memory chip market in the second quarter of this year. In the third quarter of 2022, Samsung held the largest global market share of 40.7% and 31.4% in DRAM memory chips and NAND flash memory, respectively.
However, the price of DRAM and NAND dropped approximately 20% and 15% in the first quarter of this year. Last month, Samsung announced that it would spend about $230 billion (300 trillion won) on building five new memory and foundry fabs in South Korea over the next two decades in line with the government's ambitious aim to set up a mega semiconductor hub in Yongin, on the outskirts of Seoul.
The company will announce a full financial statement at the end of April, including net profit and earnings by sector. As a leading tech company in South Korea, the current setback faced by Samsung in the memory chip production sector has implications for the entire country's economy.
With a mixture of literature, cinema, and photography, Manish is mostly traveling. When he is not, he is probably writing another tech news for you!
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