Excess memory chip inventory and lower demand for PCs and smartphones are continuing to hammer the electronics industry.
Samsung said Friday it is cutting chip output to ride out the downturn in memory chips needed for PCs and smartphones due to global inventory corrections and lower PC demand.
In related news, IDC said Sunday that global shipments of PCs dropped precipitously by 29% in the first quarter compared to a year earlier. The analyst firm blamed weak demand, excess PC inventory and worsening macroeconomic conditions.
Samsung on Friday said in a preliminary earnings statement its operating profit from January to March was 600 billion won ($455 million) down from 14.12 trillion won a year earlier.
The drastic reduction of 96% was the lowest profit for any quarter in 14 years. Samsung is the biggest memory chipmaker globally.
Makers of smartphones and PCs had stocked up on chips during the pandemic when demand for such devices surged, but they are using up those inventories even as shoppers have cut back on smartphone and PC purchases amid rising inflation.
“We are lowering production of memory chips by a meaningful level,” Samsung said. SK Hynix and Micron have also declared production cuts. SK Hynix reported a 50% cut in capital spending for 2023 while Micron has cut its fiscal 2023 investment plans by more than 30%.
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Many analysts are expecting a memory chip rebound in late 2023 and 2024. Samsung’s production cut boosted its share price by more than 1% on Monday trading.
Overall, chips sales in all categories dropped 21% globally in February, with a 14% reduction in the Americas, according to the World Semiconductor Trade Statistics Association.
RELATED: February chip sales down globally, down 14% in Americas
IDC reported PC shipments in the first quarter of 2023 were 56.9 million, noticeably lower than pre-Covid patterns with 59.2 million PCs shipped in 1Q19 and 60.6 million shipped in 1Q18.
A return to PC growth is expected towards the end of 2023. “By 2024, an aging installed base will start coming for refresh,” said Linn Huang, research vice president of devices and displays for IDC. On the other hand, if recession in key markets drags on, “recovery could be a slog.”