Samsung’s Q3 profit set to slump 80% as chip losses persist. The repercussions of a persistent worldwide chip oversupply are driving losses in what is typically the South Korean electronics giant Samsung Electronics (005930. KS) cash cow industry, and the company’s third-quarter earnings are predicted to be 80% lower than a year ago.
The world’s largest manufacturer of memory chips, cellphones, and televisions will release its preliminary third-quarter profit figures on Wednesday.
In the July-September quarter, operating profit probably decreased to 2.1 trillion won ($1.56 billion), according to an LSEG Smart estimate of 19 analysts, weighted toward those who are more reliable. In the September quarter of last year, the operating profit was 10.85 trillion won.
The change is due to its chip sector, which has historically been its top revenue generator, having likely posted quarterly losses of between 3 trillion and 4 trillion won after the price of memory chips fell to an all-time low and did not quickly rebound as some had anticipated.
According to analysts, Samsung’s reductions in chip output harmed economies of scale and increased chip manufacturing prices. Analysts claim that after announcing a reduction in output in April, Samsung further reduced output in the third quarter to decrease inventories and withstand a chip oversupply, causing the biggest industry downturn in decades.
Last month, rival Micron Technology (MU.O) predicted a quarterly loss, raising worries about a slow rebound in the memory chip manufacturer’s end markets, including data centers. For months, manufacturers of smartphones and personal computers have refrained from purchasing new memory chips, choosing instead to burn up their existing inventory due to worries about an economic slump.
As a result of their current low stocks, economists predict that demand will increase early in the next year.
According to a report published by KB Securities late last month, Samsung got its first server memory chips order from a North American data center company in a year. This has raised optimism that chip orders from data center customers will resume soon.
Great bandwidth memory (HBM) memory chips, in great demand for artificial intelligence applications, are still a bright light. Still, Samsung is lagging behind competitor SK Hynix (000660. K S) in developing such chips and gaining customers like AI chip leader Nvidia (NVDA.O).
An average of five experts’ predictions suggests that Samsung’s mobile division made an operating profit of roughly 3 trillion won during the quarter due to the company’s introduction of its high-end foldable handsets, which helped to boost sales despite the weak global smartphone market.
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