Samsung to have its lowest profits in 14 years, likely to cut its chip production significantly

Samsung reported 63 trillion South Korean Won in sales and 600 billion South Korean Won in operating profit for the first quarter of 2023 in its earnings projection on Friday. Operating profit fell 96 per cent year on year, marking the South Korean computer behemoth’s lowest profit number in 14 years, dating back to the first quarter of 2009, amid the global financial crisis. Revenue was also down 19 per cent year on year. Analysts in South Korea predict Samsung’s semiconductor unit to have lost billions of dollars in the first three months of the year. Micron and SK Hynix, two other memory chipmakers, have also reported significant losses in their most recent quarters. Its chip division is likely to report a record loss of 2.1 trillion South Korean Won , according to an average of analyst forecasts, and post another 2 trillion South Korean Won loss in the current quarter, a major divergence for what had been Samsung’s most important cash cow, generating about half of its profits in better years. According to a statement issued by Samsung on Friday, the decline in memory chips from the previous quarter was driven by the macroeconomic circumstances and a downturn in consumer demand. In addition, revenues from logic chips and display panels fell during the same time period, according to the technology behemoth.   The downturn in the chip market started last year during the second half but so far only worsened as chipmakers have warned early this year that the situation was worst than they expected and they were lowering their chip production output, an extremely rare move that reflects how dire the situation is. On Friday, Samsung stated that it was cutting chip production output in the “short term,” but added that it anticipated chip demand to stay stable in the long run.   According to Samsung, memory demand has declined dramatically due to a sluggish global economy and customers halting purchases as they focus on depleting existing supplies. “We are lowering memory chip production by a meaningful level, particularly for products with secure supply,” it continued, referring to those with ample inventories. The extent of the planned production drop was not disclosed by Samsung, but it was a significant signal for a business that had previously stated that it would make tiny changes such as pauses for repairing manufacturing lines but not a full-fledged decrease. Despite the drop in total operating profit, Samsung’s mobile division is projected to have fared well in the first quarter due to the release of the Galaxy S23 Series. The South Korean tech behemoth announced on Thursday that the series had outperformed the Galaxy S22 in all regions of the world since its introduction, with the Galaxy S23 Ultra being particularly popular, accounting for 60 per cent of sales. “The fact that the No. 1 market share firm is joining production cuts lifted shares… SK Hynix and Micron, have officially announced production cuts, but only Samsung has not,” said John Park, an analyst at Daishin Securities. “Today’s production cut signal leads to a rebound in memory chip demand in the second half of the year." Despite the reduction in short-term output, Samsung stated that it was still investing in infrastructure and research to secure essential clean rooms for chip fabrication and enhance its technological lead. Analysts predict the semiconductor market downturn to last at least through the second quarter of this year, when Samsung’s chip unit is projected to lose money again. Samsung is likely to report full-year profits at the end of the month. Read all the  Latest News,  Trending News,  Cricket News,  Bollywood News, India News and  Entertainment News here. Follow us on  Facebook,  Twitter and  Instagram.