Samsung's Q1 profit misses estimates; Analyst says production cut sign of market nearing bottom
Samsung estimated that its operating profit may have plunged by as much as 96 percent year on year in Q1.
South Korean conglomerate Samsung Electronics estimated that its first quarter profit may have fell short of market expectations in the face of weakening demand for technology products, prompting the world’s largest memory chip maker to cut back production.
In a preliminary earnings guidance, Samsung said its operating profit may have plunged by as much as 96% year on year to KRW 600b last quarter, a figure that is just a fraction of the KRW 1.5t earnings forecasted by securities brokerage CGS-CIMB.
The company’s consolidated sales may have also dropped 19% from a year earlier to KRW 63t in the first quarter due to deteriorating buying sentiment. The latest results prompted Samsung to cut memory chip production which will likely support prices according to analysts.
“Samsung’s plan to cut its memory production could signal the bottoming of the memory market,” CGS-CIMB said in a note, adding that it raised its forecast for the average selling price of Samsung memory chips.
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The brokerage now expects the average selling price of Samsung’s DRAM (Dynamic Random Access Memory) to post a softer yearly decline of 49% in 2023, compared to its earlier estimate of an up to 60% plunge.
CGS-CIMB also expects the tech giant’s Galaxy S23 line to post strong sales in the second quarter to support the blended average selling price of its mobile business and continue lifting sales and operating profit of its Samsung Display unit.
Samsung is the world’s largest manufacturer of DRAM with 45% market share based on revenues in the fourth quarter of 2022, according to a market tracker by TrendForce.