Samsung Electronics announced that it will significantly reduce its profit forecast and lower memory chip production in response to falling demand. The company expects operating profit to drop 96% year over year to just $ 455 million in the first quarter of 2023.
This points to a broader slowdown in the tech industry as demand for memory chips declines.
In a statement, Samsung said it is “optimizing our production lines and reducing memory chip output” in addition to its ongoing restructuring efforts. While demand is expected to recover in the medium to long term, Samsung said it will continue to invest in cleanroom infrastructure and increase R&D spending.
Samsung accounts for 40.7% and 31.4% of the global DRAM and NAND flash memory chip markets, respectively. These chips are used in all kinds of consumer electronics, from smartwatches to phones and laptops.
Excess supply of memory chips suggests demand for these devices has fallen significantly amid a slowdown in the global economy.
The slowdown comes after the tech industry’s biggest boom in history, fueled by the COVID-19 pandemic. However, memory chip prices have been declining since late 2021, with DRAM and NAND prices down 20% and 15% respectively in the last quarter.
On a positive note for Samsung, initial sales of its new Galaxy S23 smartphone should help support profits. Samsung is scheduled to announce detailed earnings later this month.
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