Samsung Electronics said Friday that first-quarter operating profit likely fell to about 600 billion won, roughly 96% below the 14.12 trillion won earned a year earlier, and acknowledged that it is making a “meaningful” reduction in memory-chip production as the semiconductor industry works through a severe inventory and demand correction.

The South Korean technology giant’s preliminary guidance estimated consolidated sales of approximately 63 trillion won and operating profit of approximately 600 billion won for the quarter. Samsung will release detailed results later, but the scale of the decline signals that the memory downturn has overwhelmed profits from other businesses.

Memory economics have turned sharply

Demand for DRAM and NAND flash surged during the pandemic as consumers bought PCs, companies expanded cloud capacity and supply chains struggled to keep up. That cycle has reversed. PC and smartphone shipments have weakened, corporate customers are controlling spending and buyers are drawing down inventories rather than ordering at previous rates.

Samsung had resisted the most aggressive production cuts announced by rivals, emphasizing long-term investment and its ability to use a downturn to strengthen market position. Friday’s statement marked a shift. The company said it is adjusting memory output to a “meaningful level” for products where enough inventory exists to respond to future demand while continuing infrastructure and research investment needed for long-term competitiveness.

Yonhap reported that the projected quarterly profit would be Samsung’s lowest in roughly 14 years. The decline is especially striking because Samsung is the world’s largest memory-chip producer, giving its production decisions the potential to influence global supply and pricing.

Inventory is the central problem

Semiconductor factories cannot easily be turned on and off. Advanced fabs require enormous capital investment and run complex processes that benefit from high utilization. When demand weakens suddenly, continued production can create excess inventory that pushes prices lower, compresses margins and forces manufacturers to write down stock.

That dynamic is visible across the sector. Micron Technology reported in its March 28 results that fiscal second-quarter revenue fell to $3.69 billion from $7.79 billion a year earlier and that it recorded a $1.43 billion inventory write-down. Micron also said it was reducing supply growth and capital spending as the industry works toward balance.

The comparable weakness matters because memory chips are relatively standardized products whose prices can move rapidly when supply exceeds demand. A producer can ship more units and still earn much less if pricing collapses. Cutting wafer starts sacrifices near-term volume but can help prevent inventories from expanding further.

TechCrunch reported that Samsung’s production adjustment follows cuts by other memory suppliers and is intended to accelerate the industry’s recovery from oversupply.

The downturn reaches beyond one company

The memory slump reflects a broader normalization in technology spending after exceptional pandemic demand. Consumers are holding phones and computers longer amid inflation and higher interest rates. Businesses are reassessing cloud and hardware spending. Smartphone manufacturers have also managed inventories cautiously after supply shortages turned into excess stock.

A Bloomberg report described the quarter as Samsung’s weakest profit performance since the aftermath of the global financial crisis. The company’s diversified structure—including smartphones, displays, appliances and contract chip manufacturing—offers some protection, but memory has historically generated a large share of earnings during strong cycles.

Samsung’s decision can therefore be read as both a company response and an industry signal. If the largest supplier restrains production, the reduction may help memory prices stabilize sooner. But the effect depends on how quickly customer inventories decline and whether end-market demand returns.

Long-term investment continues despite short-term cuts

Samsung made clear that the production reduction does not amount to a retreat from semiconductors. The company continues to invest in advanced process technology, research and manufacturing infrastructure. That distinction is important: reducing current output is a cyclical measure, while capacity and technology investment determine competitiveness across future generations of chips.

The Associated Press reported that Samsung expects demand to recover gradually as inventories normalize, although macroeconomic uncertainty remains high. Artificial intelligence, data centers, advanced mobile devices and automotive electronics continue to provide long-run demand drivers even while near-term consumer markets are soft.

A Reuters account noted that analysts had been watching closely for Samsung to join competitors in explicit output reductions because its scale makes it central to the supply equation.

The near-term numbers are unambiguous: a business that earned more than 14 trillion won in operating profit in the first quarter of last year now expects roughly 600 billion won. That collapse demonstrates the speed with which semiconductor cycles can reverse. Samsung’s production cut is an attempt to prevent today’s inventories from extending the downturn into tomorrow. Whether it succeeds will depend less on a single quarter’s factory schedule than on when customers begin ordering ahead of demand rather than consuming the stock already on their shelves.