Samsung flags H2 recovery after record chip loss in Q1

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) -Samsung Electronics Co Ltd flagged a gradual recovery for chips in the second half of the year after its semiconductor business reported a record loss on Thursday, driven by weak demand for tech devices.

A global downturn in semiconductor demand amid an economic slowdown and weak customer spending sent chip prices plummeting in the first quarter.

Samsung (KS:) said its chip business would focus on high-capacity server and mobile products “based on expectations of a gradual market recovery and a rebound in global demand” in the second half.

For the current quarter, Samsung said it expected limited demand recovery for memory chips as major data centre firms invested more conservatively in servers.

The world’s biggest memory chipmaker said operating profit fell to 640 billion won ($478.6 million) for the January-March quarter, down 95% from 14.12 trillion won a year earlier and the lowest profit for any quarter in 14 years. Revenue fell 18% to 63.7 trillion won.

The South Korean tech giant’s chip division – normally its most reliable cash cow – reported a 4.58 trillion won loss compared to a 8.45 trillion won profit a year earlier.

Shoppers around the world have cut back on purchases due to rising inflation. As a result, smartphone, personal computer and server companies have run down inventories, causing chip prices to plunge by about 70% over the previous nine months.

Samsung made a rare announcement of a chip production cut earlier this month, joining smaller rivals.

Although this could help chip prices recover slightly, analysts said Samsung’s profit in the current quarter may be similar to Q1 without a fundamental recovery in demand for devices that use chips.

($1 = 1,337.3800 won)