SEOUL, April 7 (Yonhap) — Samsung Electronics Co. said Friday it will cut memory output in the short term, as its quarterly profit fell sharply amid slumping demand for chips, reversing its previous stance that it would not cut production.
The world’s largest memory chip and smartphone maker earlier in the day estimated its operating profit in the January-March period of regarding 600 billion won (454.9 million US dollars), down sharply from 14.12 trillion won last year.
Samsung blamed the poor performance on the decline in demand for technical devices, as well as adjusting customer inventory.
“We will adjust memory output to a reasonable level for products for which we have sufficient inventory to handle future demand,” the company said in a regulatory statement, in an effort to deal with falling prices and oversupply. The company did not explain what that reasonable level meant.
“While we have adjusted our short-term production plan, we will continue to invest in infrastructure and expand research and development expenditures to enhance our technology leadership, as we expect strong demand in the medium and long term,” the company said.
Samsung’s sales in the first quarter are likely to drop 19 percent to 63 trillion won from 77.78 trillion won a year earlier. Net profit data was not available.
Operating profit was 16.7 percent lower than average estimates, according to a survey by Yonhap Infomax, the financial data company affiliated with Yonhap News Agency.
The tech giant has not released results for all of its business divisions, and will release its final earnings report later.
Samsung’s Hardware Solutions division, which oversees the chip business, is expected to post a deficit of regarding 4 trillion won, its first financial loss in 14 years, according to analyst estimates, as excess chip stock is growing at a rapid pace amid diminishing global demand.
The last time Samsung experienced a core unit loss in deficit was the first quarter of 2009, when the world was struggling to emerge from the 2008 financial crisis.
The company expected the global chip market to shrink by 6% year-on-year to $563 billion this year, due to a sharp decline in demand, and warned of continued difficult conditions throughout the year.
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