Samsung to cut chip production amid severe profit plunge

7 Apr 2023

Image: © Arcansél/

Samsung previously said it would not cut spending, but an expected 96pc profit slump this quarter appears to have changed the chip maker’s strategy.

Samsung Electronics has given a bleak estimate for 2023 earnings so far, with a dramatic profit plunge that is expected to be its slimmest result since 2009.

The company’s operating profit for the first quarter of the year is projected to be around 600bn won. The decrease is roughly 96pc from its operating profit of 14.12trn won in the first quarter of 2022.

The slump is far short of average analyst expectations of roughly 1.4trn won, Bloomberg reports. The decline continues a pattern for the company in recent quarters, as macroeconomic issues take their toll.

Samsung’s profits for the last quarter of 2022 dropped to 4.3trn won, a drop of more than two-thirds compared to 2021 and its smallest quarterly profit since 2014.

The company confirmed that multiple divisions saw profits decline toward the end of last year, but anticipated a recovery in demand towards the second half of this year.

For that reason, Samsung gave no hint that it would reduce spending, in contrast to many other tech companies suffering from global economic issues.

Planned production cuts

The latest results appear to have changed Samsung’s plans, however. The company said it now plans to cut its memory chip production to a “meaningful level”, Bloomberg reports.

The decision will bring Samsung in line with some of its competitors, who began production cuts earlier in the year in reaction to the volatile market.

For example, semiconductor maker TSMC warned in January that it planned to prudently manage its business and cut spending where appropriate, Reuters reports.

Executives in other semiconductor makers such as Micron and SK Hynix share Samsung’s belief that the chip market will recover later this year, but cautioned that the recover pace depends on the industry cutting supply, the Financial Times reports.

Samsung’s decision to cut spending brings it in line with other tech companies, that are tightening their belts and cutting costs amid the current economic slowdown.

Earlier this week, Apple became the latest tech giant to begin the process of staff cuts, according to sources speaking with Bloomberg. Earlier this month, Irish tech company Workhuman shared plans to cut 10pc of its global workforce.

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Leigh Mc Gowran is a journalist with Silicon Republic