South Korean media reported that Samsung Electronics lost 3 trillion won ($2.3 billion) in its memory chip business in the first two months of the year, and the loss for the entire quarter could be even bigger.

The chipmaker, based in Suwon, Gyeonggi Province, estimated that its operating loss could balloon to 4 trillion won by the end of the first quarter as the market downturn continues into 2023.

"Internally, there was a report projecting an operating loss of up to 4 trillion won from the memory chip business in the first quarter," one of the sources said.

It would be the unit's first loss since the fourth quarter of 2008, when the world was emerging from the economic crisis triggered by the collapse of Lehman Brothers.

"Its semiconductor division has a profitable contract manufacturing business, but the contract chip manufacturing division is not big enough to mitigate the huge losses in the memory business. It is inevitable that the DS unit will lose at least 2 trillion won, "the source said.

The DS division was considered the jewel in the electronics maker's crown because it generated the most profit until a sharp fall in semiconductor prices hit the company hard late last year. Other businesses include smartphones, consumer electronics and displays.

Last year, the chip division generated 23.8 trillion won in operating profit out of 43.4 trillion won in operating profit.

On a quarterly basis, operating profit was Won8.5 trillion in the first three months, Won9.9 trillion in the second and Won5.12 trillion in the third.

The fourth quarter turned grim as the division posted an operating profit of 270 billion won, down 97 percent from a year earlier.

Samsung Electronics' semiconductor division reported operating losses of less than 1 trillion won in the quarters of 2008 and 2001.

But this time, the losses are even more daunting because of a sharp drop in the prices of dynamic random access memory (DRAM) and NAND flash memory chips.

The average contract price for benchmark DRAM 8 GB DDR4 was $1.81 last month, a quarter of the average price four years ago.

Market tracker TrendForce forecasts that DRAM prices could fall 20 percent in the first quarter and another 11 percent in the second quarter, while NAND flash memory chip prices will fall 10 percent in the first quarter and 3 percent in the second quarter. DRAM prices fell 34 percent in the second half of last year.

Because of the decline in profitability,Samsung Electronics borrowed 20 trillion won from its subsidiary Samsung Display to finance semiconductor investment.

"The move was inevitable given that its cash cow DS unit is expected to post its first loss in 15 years and that overseas subsidiaries own most of the company's cash reserves," said Jeff Kim, an analyst at KB Securities.

The electronics maker said it would maintain capital expenditure levels similar to last year and did not have any "artificial" plans to cut semiconductor production this year.

Mr Kim said it was crucial to find money locally because "most of the planned Won53tn capital expenditure this year is for domestic operations".

Even if the memory chip division loses trillions of won, its overall balance sheet will remain profitable due to its dominant position in smartphones and home appliances.

That is not the case at SK Hynix, which derives more than 90 per cent of its sales from memory chips.

Analysts forecast a Won2.7tn operating loss for the world's second-largest memory chipmaker in the first quarter, according to market tracker FnGuide.

The Icheon, Gyeonggi-based producer posted an operating loss of 1.7 trillion won in the fourth quarter, compared with a profit of 4.21 trillion won a year earlier.

Some experts have called for a focus on high-end products as they are less affected by sharp price falls.

"Now is the time for chipmakers to pull resources to develop high-performance memory products," said Park Jae-geun, an electrical engineering professor at Hanyang University.

Plunging revenues at chip companies are also hurting South Korea's export lifeline.

South Korea's exports fell 2.3 percent in the first 20 days of February from a year earlier due to sluggish chip shipments, data from the Korea Customs Service showed on Tuesday.

South Korea's exports totaled $33.5 billion between Feb. 1 and 20, compared with $34.3 billion in the same period last year, the data showed. Chip exports in the first 20 days of February fell 43.9 percent from a year earlier to $3.8 billion.