Samsung Electronics, the largest memory chipmaker in the world, reported a record loss in its semiconductor business on Thursday due to weak demand for tech devices which triggered production cuts across the sector.
The company's chip business is expected to gradually recover in the second half of the year as it focuses on high-capacity server and mobile products, based on expectations of a rebound in global demand. In the short term, Samsung expects a limited recovery for memory chips as major data center firms invested more conservatively in servers.
The company saw operating profit fall to $478.6 million for the January-March quarter, down 95% from $14.12 trillion a year earlier, the lowest profit for any quarter in 14 years. Revenue also declined by 18% to $63.7 trillion.
After shoppers around the world cut back on purchases due to rising inflation, smartphone, personal computer and server companies have run down inventories, causing chip prices to plunge by about 70% over the previous nine months. Although Samsung made a rare announcement of a chip production cut earlier this month, analysts said the company's profit in the current quarter may be similar to Q1 without a fundamental recovery in demand for devices that use chips.
However, by the second half of the year, customers will have run down inventory and gradually start buying chips again, Samsung said. Despite the record loss in chips, Samsung said it spent $9.8 trillion on chips as it sets up production in its Taylor, Texas and Pyeongtaek, South Korea factories.
Samsung's mobile business was a brighter spot, reporting a profit of $3.94 trillion in Q1, up from $3.82 trillion a year earlier. In the second half, Samsung forecast the smartphone market would increase in both shipments and revenue as the global economy recovers.