South Korean tech giant Samsung has reported its lowest quarterly profit in 14 years, with a global decline in microchip demand slowing sales and profits.

The company said on Thursday its operating profit plummeted by 95% from a year earlier. It also reported an 87.4% slump in net income for the 2023 Q1 compared to the same quarter last year.

The Samsung chip division recorded its first operating loss since 2009, when the world was dealing with the aftermath of the 2008 financial crisis. The Korean giant's chip production reported 4.58 trillion won (approximately $3.3 billion; €3 billion) in losses.

What caused the drop in profit?

Samsung owed its slowed profit to slowing consumer spending on electronics, coupled with the current excess in microchip production, which fails to match the slowing demand.

The core memory business saw almost unprecedented demand during the two years of the pandemic, with worldwide lockdowns fueling smartphone and computer sales. This created first a global shortage and then an uptick in the memory chips' production.

However, since lockdowns receded, and with rising global inflation, computer sales have dropped again, causing chip prices to drop as the demand shrinks.

The memory chips usually account for about half of the Korean tech giant's profits.

Samsung said it expected memory chips' demand to "gradually recover" in the second half of 2023. It cited forecasts of declining customer inventory levels.

Seoul announced last month that it would build the biggest chip center in the world, largely using some 300 trillion won of private investment from Samsung over the next 20 years.

rmt/msh (AFP, dpa)