Samsung Electronics official announced production cut: operating profit plummeted 95.8% in the first quarter, storage prices plummeted

CTOnews.com, April 7 (Xinhua)-- Samsung Electronics reported first-quarter results on Friday. Operating profit is expected to plunge 95.8%, below analysts' expectations. As the supply glut of chips worsened, buyers slowed purchases amid a global economic slowdown.

Samsung Electronics expects operating profit for the first quarter of 2023 to be 600 billion won (CTOnews.com Note: currently about 3.132 billion yuan), down 95.8% from a year earlier, while sales are 63 trillion won (currently about 328.86 billion yuan), down 19% from a year earlier. Samsung Electronics said it would cut chip production "meaningfully".

Samsung Electronics shares rose 3% in early trading after the production cut was announced, while rival SK Hynix soared 5% as investors welcomed the production cut plan to help maintain pricing power.

Operating profit was 16.7 per cent below average expectations, according to Yonhap Infomax, a financial data company owned by Yonhap news agency. Samsung Electronics will release its final earnings report later.

Analysts say the launch of the new flagship smartphone is expected to support mobile profits, but its chip division is likely to report a quarterly loss of more than Won3,000bn (currently about Rmb15.69 billion). This is due to falling memory chip prices and a sharp reduction in inventory value.

Competitors Micron and SK Hynix have previously announced sharp investment cuts, and the chip downturn is expected to last at least until the second half of 2023. By contrast, Samsung has been slow to change its investment plans and has finally announced a production cut.

In February, Samsung Electronics said it planned to borrow 20 trillion won (currently about 104.6 billion yuan) from Samsung's display department as working capital until August 2025.