SEOUL: Samsung Electronics Co Ltd flagged the gradual recovery for chips in the second half of the year after its semiconductor business reported a record 3.4 billion dollar loss on Thursday, driven by a chip glut from weak demand for tech devices.
A world downturn in semiconductor purchases amid an economic slowdown and corporate belt-tightening sent chip prices plummeting in the first quarter, triggering production cuts across the sector.
By the year’s second half, Samsung said customers would have run down inventory and would gradually start buying chips again.
“We expect inventory levels to start dropping in the second quarter,” said Jaejune Kim, executive vice president of Samsung’s memory business. For the current quarter, Samsung expected limited recovery for memory chips as significant data centre firms invested more conservatively in servers.
The biggest global memory chipmaker said operating profit fell to 640 billion won for the January-March quarter, down 95 percent from a year earlier and its most minor profit for any quarter in 14 years.
The South Korean tech giant’s chip division – commonly its reliable cash cow reported a 4.58 trillion won loss compared to an 8.45 trillion won profit the year earlier.
Shoppers around the world cut back on purchases due to surging inflation. As a result, cellphone, personal computer, and server companies have run down inventories, causing chip prices to plunge by about 70 percent over the previous nine months.
Samsung stance
Samsung announced the rare chip production cut earlier this month, joining smaller rivals such as SK Hynix Inc.
Analysts said that Although this could help chip prices recover slightly, Samsung’s profit in the current quarter might be similar to the first quarter without the fundamental recovery in demand for devices that use chips.
