Samsung Electronics announced its first-quarter results, with operating profit expected to plunge 95.8 percent, below analysts’ expectations. Because of the worsening oversupply of chips, buyers are slowing down their purchases amid the global economic slowdown.
Samsung Electronics is expected to report an operating profit of 600 billion won (currently about 3.132 billion CNY) in the first quarter of 2023, down 95.8% year-on-year; sales of 63 trillion won (currently about 328.86 billion CNY), down 19% year-on-year. Samsung Electronics said the company will “meaningfully” cut chip production.
Shares of Samsung Electronics rose 3 percent in early trading after the announcement, while those of rival SK Hynix soared 5 percent as investors welcomed the plan to cut production to help maintain pricing power.
Operating profit was 16.7 percent lower than the average estimate, according to a survey by Yonhap Infomax, a financial data company owned by Yonhap News Agency. Samsung Electronics will later release its final earnings report.
Analysts said the launch of new flagship smartphones is expected to bolster mobile profits, but its chip unit could report a quarterly loss of more than 3 trillion won (currently about 15.69 billion CNY) due to falling memory chip prices and a sharp cut in the value of its inventory.
Rivals Micron Technology and SK Hynix previously announced sharp cuts in investment plans, and the chip slump is expected to last until at least the second half of 2023. In contrast, Samsung has been slow to change its investment plans, and now finally announced production cuts.
In February, Samsung Electronics said it plans to borrow 20 trillion won (currently about 104.6 billion CNY) from Samsung’s display division as working capital until August 2025.
