Samsung Electronics said Friday it was cutting its chip production to a “meaningful level” after reporting a worse-than-expected 96 percent plunge in its quarterly operating profit estimate amid the global chip downturn.

“We’re adjusting to a lower memory production at a meaningful level centering on products that have secured enough inventory to respond to future demand, in addition to optimizing line operations that are already underway,” the company said in a statement.

The South Korean tech giant did not disclose the size of the cut. However, it is the first time the company has made it official, as it had maintained its position not to seek an artificial cut in production, bucking the trend of global rivals that had announced reductions both in production and spending to cope with the worsening business conditions.

Alongside the announcement about short-term chip production, Samsung said it would continue to invest in infrastructure to secure essential clean rooms and expand spending on research and development to strengthen its technology leadership, as it forecast solid demand in the mid- to long-term.

In its earnings guidance, the tech giant predicted its January-March operating profit to be 600 billion won ($455 million), nosediving from 14.12 trillion won a year prior. The figure was far lower than the consensus of 1.1 trillion won by local analysts provided by market intelligence FnGuide.

It was the first time in 14 years that Samsung reported a quarterly operating income below the level of 1 trillion won, since the first quarter of 2009 when it logged 590 billion won in profit.

Sales were expected to have lost 19 percent on-year to 63 trillion won, still lower than the previous market consensus of 64.2 trillion won.

Samsung blamed the sluggish demand for memory chips. While details on each business sector’s estimated figures were not available for Friday’s earnings guidance, market watchers assumed the company’s chip deficit was partially offset by its mobile and appliances businesses.

Analysts further estimated that Samsung’s device solutions division in charge of the tech giant's chip business likely logged a deficit of around 4 trillion won solely in the first quarter this year as memory chip prices fell and its inventory has been soaring.

According to Samsung’s 2022 annual report released last month, its semiconductor division posted roughly 29.6 trillion won in inventory assets as of the fourth quarter, up 76.6 percent compared to the same period in the previous quarter.

NH Investment analyst Doh Hyun-woo said Samsung has already cut production on a significant scale. Citing some testing and parts companies as sources, he said the number of orders they received from the tech giant in the first quarter decreased by over 30 percent.

Samsung’s DRAM chip inventory is higher than its chipmaking rivals, the analyst said. To overcome this situation, Doh further forecast the world's largest memory chipmaker will likely “expand the production cut level.”

Market watchers expected memory chip prices would continue to decline in the second quarter but with a possible rebound from the second half of this year. According to Taiwan-based market analyst firm TrendForce, DRAM prices have fallen 20 percent in the January-March period and the prices are expected to fall another 10 to 15 percent in the April-June period.

“With inventory pressures persisting for both DRAM and NAND flash, demand is expected to pick up in the third quarter alongside the industry’s rebound,” said Ko Yeong-min, an analyst at Shinhan Securities. Doh also predicted that Samsung’s inventory would likely decrease starting in the second quarter.

While Samsung’s earnings guidance was released before the Seoul stock market opened Friday, the country’s bellwether stock soared about 3.5 percent in early trading as investors welcomed the news on Samsung’s production cut to help preserve pricing power. Samsung shares closed at 65,000 won, up 4.33 percent.

The company will release a detailed first-quarter earnings report at the end of this month.