Samsung Electronics Co. has exceeded profit expectations in the third quarter, indicating that the slump in the semiconductor market may finally be easing. The company, which is the largest global producer of memory chips and smartphones, reported a 40% decrease in net income to 5.5 trillion won ($4.1 billion) for the September quarter. This figure surpasses analyst estimates of 2.52 trillion won, representing a notable improvement from the 86% decline experienced in the previous quarter.
The chip division, which is crucial for Samsung, posted an operating loss of 3.75 trillion won, compared to a 4.4 trillion won loss in the prior quarter. Analysts had predicted losses ranging between 3.6 trillion won and 3.8 trillion won, highlighting an unexpectedly better performance.
The semiconductor market, valued at $160 billion, has been severely impacted by a drop in demand for smartphones and personal computers, which are key products utilizing the semiconductors produced by Samsung and SK Hynix Inc., its competitor. As a result, memory chip prices have plummeted, leading numerous chipmakers to reduce their investments in new capacity. Consequently, investors have been eagerly awaiting signs of a recovery in the industry.
Samsung’s revenue declined by 13% in the third quarter, accompanied by a 78% drop in operating income when preliminary results were announced earlier this month. However, the decline in profits was more modest than in the previous quarter, which led to a surge in the company’s stock. Intel Corp. also contributed to the positive sentiment by predicting a return to sales growth in the fourth quarter due to improving demand for personal computers, resulting in its stock experiencing the largest increase in nearly three years.
The release of Samsung’s full quarterly earnings report has come several weeks after the United States granted the company and SK Hynix an exemption to procure the necessary equipment for their chipmaking operations in China. This exemption has alleviated some of the uncertainty surrounding these two memory leaders, enabling them to continue their operations in the largest chip market in the world over the long term.
In a competition to develop AI training tools, Samsung and SK Hynix are currently racing against each other. SK Hynix holds an advantage as the only supplier of next-generation DRAM to AI chip manufacturer Nvidia Corp. However, Samsung plans to double its capacity for producing high-bandwidth memory, which is vital for accelerating AI training, by 2024 in an effort to catch up.
In conclusion, Samsung Electronics Co.’s profit beat expectations in the third quarter, indicating a potential bottoming out of the semiconductor market’s slump. Despite a decline in net income compared to the previous year, it has shown improvement compared to the sharp decline experienced in the second quarter. The granted exemption to operate in China’s chip market has provided a boost, while Samsung is striving to enhance its AI training capabilities. Investors and industry analysts will be closely monitoring the company’s future performance to gauge the true recovery of the semiconductor market.
