Samsung Electronics Co Ltd's operating profit dropped in the first quarter on the backdrop of continued decline in prices of its memory chips and weak demand.

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The world's largest memory chipmaker said its operating profit fell to 640 billion won ($478.6 million) for the first quarter, down 95 percent from last year's 14.12 trillion won and the lowest profit for any quarter in 14 years. Its revenue dropped 18 percent to 63.7 trillion won.

The South Korean electronics giant flagged a gradual recovery for chips in this year's second half. A global downturn in semiconductor demand amid an economic slowdown and weak customer spending sent chip prices plummeting in the first quarter.

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.

Samsung 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.

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.

With inputs from Reuters

First Published:Apr 27, 2023 6:37 AM IST