SEOUL, April 10 (UPI) -- Samsung Electronics announced a plan to reduce its memory chip output after reporting its lowest quarterly profit in 14 years.
The world's largest memory chipmaker saw its first-quarter operating profit plummet almost 96% from the same period a year ago to $455 on sales of $48 billion, which was also a 19% fall.
The disappointing results, announced Friday, seem to have prompted Samsung Electronics to change its longstanding policy of not adjusting output artificially.
Memory chips are used in consumer devices from laptops and cellphones to smartwatches.
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Samsung Electronics did not provide details by divisions, but its chip business alone is estimated to have suffered close to a $3 billion loss during the January-March period.
The company is expected to provide by-division figures later.
"We are cutting down on the production of memory chips to meaningful levels for products already at sufficient level inventory-wise," Samsung said in a statement.
"Although the short-term chip production has been adjusted downward, we do expect demand to remain solid in the long term. As such, we will continue to invest in infrastructure and strengthen research with an eye toward continued technological leadership," it said.
Samsung did not disclose details or a timetable for the coming reduction.
Despite the worse-than-expected bottom line, investors snapped up shares of Samsung Electronics, likely expecting the news of chip output reduction to address the glut in global chip supply and eventually lead to price increase.
The share price of Samsung Electronics was up 4.33% Friday on the South Korean stock market. SK hynix's shares, the world's No. 2 player in the memory chip market, also surged 6.32%.
"This measure by industry bellwether Samsung Electronics greatly affects the memory chip industry and related businesses," Mirae Asset Securities researcher Kim Young-gun told UPI News Korea.
"Thanks to its decision, the glut in global inventory of memory chips will likely begin to taper off during the second quarter of this year," he said.
