Samsung, one of the biggest electronics brands in the world, is now struggling to handle its chip production arm as its shares plunge by 96%.

The Korean giant is sitting on huge inventories after a build-up to meet the expected pent-up demand post-COVID did not materialise.

Samsung's initial thoughts on its performance in the last quarter are gloomy.

In response, the company is now set to make "meaningful cuts" driven by a slowdown in the global semiconductor market.

In a preliminary earnings statement, the world's largest memory chip and TV maker estimated that its operating profit fell to $455.5 million in January-March, marking the lowest profit for any quarter in 14 years. 
 
The company plans to cut the production of memory chips to tighten supply amid a huge pile of inventories.

The move is a strong signal from Samsung, which had previously said it would only make small adjustments like pauses for refurbishing production lines, but not a full-blown cut.

It did not disclose the size of the planned cut. The first-quarter profit fell short of a $733.3 million Refinitiv SmartEstimate, which was weighted towards more consistently accurate analysts.

With consumer demand for tech devices sluggish due to rising inflation, semiconductor buyers, including data centre operators and smartphone and personal computer makers, are refraining from new chip purchases and using up inventories.

Analysts estimate that the chip division sustained quarterly losses of more than $3.03 billion as memory chip prices fell and its inventory values were slashed.

This would be the chip business's first quarterly loss since the first quarter of 2009, a major divergence from what is normally a cash cow that generates about half of Samsung's profits in better years.

Despite the disappointing results, shares in Samsung rose 3% in early trading, while shares of rival SK Hynix surged 5% as investors welcomed plans to cut production to help preserve pricing power.

Samsung is set to release detailed earnings, including divisional breakdowns, later this month.

Samsung, one of the biggest electronics brands in the world, is now struggling to handle its chip production arm as its shares plunge by 96%. The Korean giant is sitting on huge inventories after a build-up to meet the expected pent-up demand post-COVID did not materialise.

Samsung, one of the biggest electronics brands in the world, is now struggling to handle its chip production arm as its shares plunge by 96%. The Korean giant is sitting on huge inventories after a build-up to meet the expected pent-up demand post-COVID did not materialise. Samsung's initial thoughts on its performance in the last quarter are gloomy. In response, the company is now set to make "meaningful cuts" driven by a slowdown in the global semiconductor market. In a preliminary earnings statement, the world's largest memory chip and TV maker estimated that its operating profit fell to $455.5 million in January-March, marking the lowest profit for any quarter in 14 years. The company plans to cut the production of memory chips to tighten supply amid a huge pile of inventories. The move is a strong signal from Samsung, which had previously said it would only make small adjustments like pauses for refurbishing production lines, but not a full-blown cut. It did not disclose the size of the planned cut. The first-quarter profit fell short of a $733.3 million Refinitiv SmartEstimate, which was weighted towards more consistently accurate analysts. With consumer demand for tech devices sluggish due to rising inflation, semiconductor buyers, including data centre operators and smartphone and personal computer makers, are refraining from new chip purchases and using up inventories. Analysts estimate that the chip division sustained quarterly losses of more than $3.03 billion as memory chip prices fell and its inventory values were slashed. This would be the chip business's first quarterly loss since the first quarter of 2009, a major divergence from what is normally a cash cow that generates about half of Samsung's profits in better years. Despite the disappointing results, shares in Samsung rose 3% in early trading, while shares of rival SK Hynix surged 5% as investors welcomed plans to cut production to help preserve pricing power. Samsung is set to release detailed earnings, including divisional breakdowns, later this month.

Samsung to cut chip production after profits hit 14-year low

Samsung on Friday said the crisis over its exploding Note 7 smartphones would cost another $3 billion-plus in lost profit over the next two-quarters, but hoped expanded sales of its other flagship handset would help cushion the impact.

The profit warning came two days after the South Korean electronics giant slashed its operating profit for the third quarter by $2.3 billion.

After a recall problem with the large-sized Galaxy Note 7 turned into a full-blown crisis, Samsung announced earlier this week that it was scrapping the model entirely, a devastating move for a company that prides itself on the quality production of cutting-edge technology.

On top of the third-quarter loss, Samsung said the drop in sales arising from the decision to discontinue the Note 7 would continue to impact profit margins during the October-March period, including the crucial holiday buying season.

It estimated operating profit loss in the fourth quarter at around the &quot;mid-2 trillion ($2.2 billion) won range&quot; and 1.0 trillion won for the first quarter of 2017.

&quot;Moving forward, Samsung Electronics plans to normalise its mobile business by expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 edge,&quot; the company said in a statement.

Samsung announced a recall of 2.5 million units of the oversized Galaxy Note 7 smartphone in early September after several devices exploded or caught fire.

When replacement phones also started to combust, the company eventually decided to kill off the Note 7 for good.

The company blamed faulty batteries made by an unnamed supplier, widely believed to be its sister company Samsung SDI.&nbsp;

But numerous experts and analysts said the problem may have been with the handset&#39;s underlying technology, and Samsung&#39;s decision to rush the launch of the smartphone ahead of the latest iPhone from arch-rival Apple.

In its statement, Samsung vowed to &quot;focus on enhancing product safety for consumers by making significant changes in its quality assurance processes&quot;.

Industry analysts have suggested the Note 7 fiasco could end up costing Samsung anywhere between $10 billion and $20 billion, with a lot of the losses tied up with the harder-to-calculate damage done to brand reputation.

&quot;And this figure doesn&#39;t take into account the huge marketing costs for Samsung to win back customer loyalty and to regain the trust of mobile carriers,&quot; said Greg Roh, an analyst at HMC Investment Securities

&quot;It will have to spend a lot of money to recover and much work has to be done,&quot; Roh said.

The stock market, which has largely factored in the inevitable profit hit Samsung will be forced to take, reacted calmly to Friday&#39;s announcement.

Samsung&#39;s share price dropped 0.4 per cent at the opening bell, but then recovered to move into positive territory, up 0.5 per cent.

(AFP)

The profit warning came two days after the South Korean electronics giant slashed its operating profit for the third quarter by $2.3 billion

Samsung on Friday said the crisis over its exploding Note 7 smartphones would cost another $3 billion-plus in lost profit over the next two-quarters, but hoped expanded sales of its other flagship handset would help cushion the impact. The profit warning came two days after the South Korean electronics giant slashed its operating profit for the third quarter by $2.3 billion. After a recall problem with the large-sized Galaxy Note 7 turned into a full-blown crisis, Samsung announced earlier this week that it was scrapping the model entirely, a devastating move for a company that prides itself on the quality production of cutting-edge technology. On top of the third-quarter loss, Samsung said the drop in sales arising from the decision to discontinue the Note 7 would continue to impact profit margins during the October-March period, including the crucial holiday buying season. It estimated operating profit loss in the fourth quarter at around the "mid-2 trillion ($2.2 billion) won range" and 1.0 trillion won for the first quarter of 2017. "Moving forward, Samsung Electronics plans to normalise its mobile business by expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 edge," the company said in a statement. Samsung announced a recall of 2.5 million units of the oversized Galaxy Note 7 smartphone in early September after several devices exploded or caught fire. When replacement phones also started to combust, the company eventually decided to kill off the Note 7 for good. The company blamed faulty batteries made by an unnamed supplier, widely believed to be its sister company Samsung SDI. But numerous experts and analysts said the problem may have been with the handset's underlying technology, and Samsung's decision to rush the launch of the smartphone ahead of the latest iPhone from arch-rival Apple. In its statement, Samsung vowed to "focus on enhancing product safety for consumers by making significant changes in its quality assurance processes". Industry analysts have suggested the Note 7 fiasco could end up costing Samsung anywhere between $10 billion and $20 billion, with a lot of the losses tied up with the harder-to-calculate damage done to brand reputation. "And this figure doesn't take into account the huge marketing costs for Samsung to win back customer loyalty and to regain the trust of mobile carriers," said Greg Roh, an analyst at HMC Investment Securities "It will have to spend a lot of money to recover and much work has to be done," Roh said. The stock market, which has largely factored in the inevitable profit hit Samsung will be forced to take, reacted calmly to Friday's announcement. Samsung's share price dropped 0.4 per cent at the opening bell, but then recovered to move into positive territory, up 0.5 per cent. (AFP)

Samsung sees further $3 billion profit hit from Note 7 crisis

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Samsung to cut chip production after profits hit 14-year low

Samsung sees further $3 billion profit hit from Note 7 crisis