Samsung Reports Better-Than-Expected Third Quarter Operating Profit as Memory Chip Glut May Be Bottoming Out
SEOUL, South Korea – Samsung Electronics, the world’s largest maker of dynamic random-access memory (DRAM) chips, has reported a better-than-expected third quarter operating profit. Despite dropping by 77.6% from a year ago, the operating profit in the quarter jumped 262.6% compared to the second quarter. This signals that the memory chip glut may be bottoming out.
The third quarter results were as follows: revenue of 67.4 trillion Korean won (approximately $50 billion) and operating profit of 2.43 trillion Korean won. Analysts polled by LSEG had expected revenue of 67.8 trillion Korean won and operating profit of 2.3 trillion Korean won.
While the year-on-year decline is significant, the increase in operating profit from the second quarter suggests a positive trend. Samsung’s revenue for the quarter ending September fell by 12.2% from a year ago, while operating profit dropped by 77.6% in the same period. However, there was a 262.6% increase in operating profit from the previous quarter, indicating some stabilization in the market.
Samsung’s memory chips are crucial components found in smartphones and computers. The company is optimistic about the future, stating that they are observing initial indications of demand gradually stabilizing and improving, supported by recovering consumer sentiment, easing inflation, and major customers introducing new products.
Looking ahead, Samsung expects fourth quarter demand to pick up with year-end promotions, new product launches by major customers, and strong demand for generative AI. The company also plans to expand sales of advanced-node products, including DDR5 and UFS4.0, to meet the increasing demand for high-performance memory chips.
Despite challenges such as wars, geopolitical risks, and ongoing customer inventory adjustments, Samsung remains confident in a meaningful profit recovery for the next several quarters, led by memory. Goldman Sachs has maintained a “buy” rating and an unchanged target price for Samsung shares.
The global smartphone market experienced a decline in the third quarter due to slower-than-expected recovery in consumer demand. However, there are signs of a market recovery ahead as September showed a positive performance. SK Kim, an analyst at Daiwa Capital Markets, predicts a rebound in earnings from the fourth quarter, driven by product mix improvement and a memory price hike.
In addition, Samsung is exploring opportunities in the AI market. The company plans to address the growing demand for generative AI by increasing the sales of high-bandwidth memory 3 (HBM3) and high-bandwidth memory 3E (HBM3E). This move aligns with Samsung’s vision to become a leader in supplying memory processors for AI applications.
Moreover, Samsung is expected to supply high-performance DRAM chips and HBM3 to U.S.-based chip designer Nvidia, offering further growth opportunities related to AI demand in 2024.
As uncertainties persist, Samsung remains hopeful about the market’s recovery and its ability to capitalize on emerging opportunities in the tech industry. With its strong position as a leading memory chip manufacturer, Samsung is poised for continued success in the coming quarters.