▲ The file photo, taken April 11, 2022, shows pedestrians walking past the Seocho office of Samsung Electronics Co. in Seoul. (Yonhap)

(LEAD) Samsung Electronics-Q1 earnings guidance

(LEAD) Samsung Electronics Q1 profit likely drops 96 pct as demand plunges

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SEOUL, April 7 (Yonhap) -- Samsung Electronics Co. on Friday said its first-quarter operating profit likely nose-dived nearly 96 percent from a year earlier due to a sharp drop in demand for chips and home appliances amid recession fears.

The world's largest memory chip and smartphone maker estimated its January-March operating profit at 600 billion won (US$454.9 million), sharply down from 14.12 trillion won a year ago.

Sales likely fell 19 percent to 63 trillion won from 77.78 trillion won from a year earlier, the company said in a regulatory filing. The data for net profit was not available.

The operating profit was 16.7 percent lower than the average estimate, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

The tech giant did not provide the results of each business division and will release its final earnings report later.

Samsung's Device Solution (DS) division, which oversees its chip business, is forecast to run a deficit of around 4 trillion won, in its first financial loss in 14 years, according to analysts' estimates, as a surplus chip inventory has been growing significantly amid tapering global demand.

The last time Samsung saw its backbone unit trade at a deficit was the first quarter of 2009, when the world was emerging from the 2008 financial crisis.

Samsung said in the regularly filing Friday that it is adjusting chip output to a "meaningful level" in order to resolve the inventory glut and falling memory chip prices, in an about-face of its previous position that there would be no "artificial" production reduction.

It did not elaborate on what the meaningful level means.

The world's largest memory chip maker forecast the global chip market will shrink 6 percent on-year to $563 billion this year, due to a sharp drop in demand, and warned of difficult conditions continuing throughout the year.

Analyst Kim Dong-won from KB Securities expected oversupply issues to start to be resolved in a few months, and DRAM and NAND flash prices to begin rebounding in the second half after hitting the bottom in the second quarter.

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