2023-10-09 22:30:01
Samsung Electronics’ third-quarter profit is expected to fall 80% from a year earlier as the effects of a global chip glut drive losses in what is normally the South Korean tech giant’s cash cow .
The world’s largest maker of memory chips, smartphones and televisions will announce preliminary third-quarter results on Wednesday.
Operating profit likely fell to 2.1 trillion won ($1.56 billion) in the July-September quarter, according to an LSEG SmartEstimate from 19 analysts, weighted by those who are more consistently accurate .
This compares with an operating profit of 10.85 trillion won in the September quarter last year.
The turnaround is because the chip division, traditionally its biggest earner, likely posted quarterly losses in the range of 3 trillion won to 4 trillion won after prices for memory chips, which were at their lowest, did not recover as quickly as some had predicted.
Samsung’s chip production cuts have also hurt economies of scale, raising chip manufacturing costs, analysts say.
After announcing a production cut in April, analysts said Samsung cut production further during the third quarter to reduce inventory and deal with the chip glut that is causing the worst slowdown in the industry for decades.
Rival Micron Technology reported a quarterly loss last month, raising concerns about the slow recovery in the memory chip maker’s end markets, such as data centers.
Smartphone and personal computer makers have refrained from buying new memory chips, opting to use up their existing stocks for months over fears of an economic slowdown.
Their stocks are now low enough for demand to pick up by early next year, analysts say.
Samsung recently received its first order for server memory chips in a year from a North American data center company, KB Securities said in a note late last month, raising hopes that data center customers will also start buying chips again.
Strong demand for memory chips used in artificial intelligence, such as high-bandwidth memory (HBM), remains a positive, but Samsung lags behind rival SK Hynix in developing these chips and obtaining from clients such as Nvidia, a leader in the field of artificial intelligence chips.
Samsung’s mobile business likely posted an operating profit of around 3 trillion won, according to the average of five analysts’ forecasts, as the company launched its high-end foldable smartphones during the quarter, boosting sales despite the sluggish global smartphone market. ($1 = 1,347.1300 won) (Reporting by Joyce Lee; Editing by Jamie Freed)
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