Lede

Samsung Electronics plans to cut its chip production in response to a worse-than-expected 96% drop in quarterly operating profit.

Summary

• Samsung to make a "meaningful" cut in chip production after posting its lowest profit in 14 years.
• Global semiconductor market downturn is exacerbating the issue.
• Shares in Samsung rose 3% while rival SK Hynix shares surged 5% as investors welcomed plans to cut production to help preserve pricing power.
• Samsung estimated that operating profit fell to 600 billion won ($455.5 million) in January-March, down from 14.12 trillion won a year earlier.
• The decline was attributed to a sharp fall in memory demand due to the macroeconomic situation and slowing customer purchasing sentiment.
• Samsung said it is lowering the production of memory chips, especially those with supply secured, but did not disclose the size of the planned cut.
• The first-quarter profit was lower than expected, and multiple estimates were revised down earlier this week.
• With consumer demand for tech devices sluggish due to rising inflation, semiconductor buyers are refraining from new chip purchases and using up inventories.
• Analysts estimate the chip division sustained quarterly losses of more than 4 trillion won ($3.03 billion).
• Revenue likely fell 19% from the same period a year earlier to 63 trillion won.
• The company will release detailed earnings, including divisional breakdowns, later this month.