Samsung Electronics wants to cut back on the number of memory chips it makes because its operating profit is expected to drop by about 96% in the first quarter of 2023 compared to the same time last year. This will be the first time since Q1 2009 that the South Korean tech giant has made less money than this.
The world’s largest memory chip maker stated in its preliminary earnings report on Friday that its profit was hurt by a slowing global economy, an oversupply of memory chips, and slowing demand.
“Samsung is making changes to bring down the amount of memory it makes to a meaningful level,” the report said. Samsung says that it has optimized line operations to make sure that there will be enough memory chips to meet future needs. The tech company also said that it will keep putting money into infrastructure and research and development to keep its tech industry leadership.
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Samsung is expected to make a profit of 600 billion won ($450 million) from January to March. This is down 95.8% from Q1 2022 when the company made 14.12 trillion won. Even though the company won’t release its results until the end of the month, Bloomberg data shows that analysts expected the company to make 1.4 trillion won in Q1 profit. Its sales are also expected to drop from 77.78 trillion won in the first quarter of last year to 63 trillion won in the first quarter of this year.
Samsung said earlier this year that it wouldn’t cut its investments in memory chips, even though demand was falling. Instead, it was hoping that the market for memory chips would pick up in the second quarter of this year. At the same time, competitors like Micron Technology, Kioxia, and SK Hynix have cut their production of memory chips to deal with the oversupply.
In the third quarter of 2022, Samsung had the largest share of the DRAM memory chip market (40.7%) and the NAND flash memory market (31.4%). A report from TrendFroce says that the prices of DRAM and NAND dropped by about 20% and 15%, respectively, in the first quarter of this year.