- Samsung’s third-quarter operating profit was better than expected, despite falling 77.6% from a year ago.
- Although it had a year-over-year decline, operating profit rose 262.6% in the quarter compared to the second quarter, showing signs that the memory chip glut may be bottoming out.
- Samsung is the world’s largest manufacturer of dynamic random-access memory chips found in consumer devices such as smartphones and computers.
A general view of the audience is seen at the Samsung booth at Chinajoy 2023 at the Shanghai New Expo Center in Shanghai, China on July 28, 2023 (Photo by Ying Tang/NurPhoto via Getty Images)
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of South Korea Samsung Electronics said Tuesday’s quarterly operating profit fell 77.6% from a year ago but was better than expected.
Although it had a year-over-year decline, third-quarter operating profit rose 262.6% from the second quarter, indicating that the memory chip glut may be bottoming out. First quarter Operating profit fell by 85.15% From the fourth quarter of 2022 Second quarter operating profit An improvement of only 4.68% from the first quarter.
Here are Samsung’s third quarter results and estimates:
- Revenue: 67.4 trillion Korean won (about $50 billion), vs. 67.8 trillion Korean won expected by analysts polled by LSEG.
- Operating profit: 2.43 trillion Korean won, vs. 2.3 trillion won expected by LSEG analysts.
Samsung’s revenue in the quarter ended September fell 12.2% from a year earlier, while operating profit fell 77.6%.
Earlier this month, Samsung estimated third-quarter revenue at 67 trillion Korean won and operating profit at 2.4 trillion.
The South Korean chip company is the world’s largest dynamic random access memory chip maker. Its memory chips are found in consumer devices such as smartphones and computers.
“In the fourth quarter, uncertainties persist regarding the market’s recovery driven by wars and geopolitical risks, gradual demand pick-up and ongoing customer inventory adjustments,” Samsung said during its earnings call.
“However, we are observing early signs of demand, gradually stabilizing and improving, as consumer sentiment recovers, inflation declines and key customers launch new products, particularly in the PC and mobile segments,” Samsung said.
From an outlook for memory demand, Samsung said it expects fourth-quarter demand to be driven by year-end promotions, new product launches by its key customers and strong demand for generative AI.
Large language models like ChatGPT require high-performance memory chips to help AI models remember details of past conversations and user preferences in order to generate human-like responses.
A Press release Ahead of its earnings call, Samsung said it had “received several purchase inquiries amid awareness that the industry is bottoming out following industry-wide production cuts.” It said it will continue to expand sales of advanced edge products.
These advanced edge products include DDR5 – Double Data Rate 5 Synchronous Dynamic Random-Access Memory and UFS4.0 – Flash storage for the 5G era.
“Our view for the next several quarters is a meaningful profit recovery led by memory, with large industry-wide production cuts, gradually improving demand trends and a mix improvement towards higher-average selling price products such as DDR5,” Goldman Sachs said in an Oct. 12 report.
The investment firm maintained a “buy” rating with a target price of 93,000 won. Shares of Samsung were down 0.30% at 67,100 on Tuesday morning.
Global smartphone sales volumes fell 8% year-on-year in the third quarter of 2023, marking the ninth consecutive quarter of decline. According to Counterpoint Research. This is due to a slower-than-expected recovery in consumer demand.
Smartphone and PC makers have struggled with excess inventories of memory chips after stockpiling to meet increased demand for consumer devices during the pandemic. Inflation curbs consumer spending, reduces consumer purchases of devices, and lowers demand and prices for memory chips.
But the market grew by 2% quarter-on-quarter, boosted by a positive performance in September, indicating a market recovery.
“We expect earnings to recover from 4Q23 on the back of product mix improvement and memory price hikes that will expand sales of high-bandwidth memory 3,” said SK Kim, analyst at Daiwa Capital Markets, Oct. 3 said in note.
“For memory, we expect a meaningful narrowing of losses due to further product mix improvement and reversal of inventory write-downs from memory price recovery. For display, we expect further revenue improvement from expanding supply of OLED panels for iPhone 15 models,” said Kim.
Samsung said it will expand sales of its advanced edge products to meet demand for high-performance chips in developing AI.
“We will aggressively address the demand for manufacturing AI by increasing sales of our HBM3 and HBM3E segment,” Samsung said on Tuesday, referring to next-generation memory processors with high-bandwidth memory.
Local media reported Samsung is expected to supply high-performance DRAM chips and HBM3 to US-based chip designer Nvidia. Shares of Nvidia soared 187.54% on rising demand for its AI chips.
Daiwa Capital’s Kim said he sees “growing opportunities related to AI demand in 2024” for Samsung.
“In addition to supplying HBM3 to Nvidia from 4Q23, expanding supply in 2024, we expect Samsung Electronics to supply HBM3P, targeting next-gen AI GPUs from mid-2024,” Kim said in an Oct. 3 note.
