Samsung Electronics, the world’s largest memory chip and smartphone maker, has reported a smaller-than-expected 78% drop in its preliminary third-quarter profit. This comes as the battered memory chip market shows signs of recovery from a severe downturn. Despite the decline, Samsung shares opened 3.3% higher compared to a 1.4% rise in the wider market.
The company estimated its operating profit to have fallen to 2.4 trillion won ($1.79 billion) in July-September, down from 10.85 trillion won in the same period last year. While this figure is significantly lower than last year, it exceeds the 2.1 trillion won forecasted by analysts. The positive news has sparked optimism among investors, as memory chip prices are beginning to stabilize and some types are even showing signs of rebounding.
Analysts believe that the worst may be over for Samsung’s chip business, which experienced losses of 4.58 trillion won and 4.36 trillion won in the first and second quarters respectively. The global economic slowdown and high interest rates had dampened demand for consumer goods, forcing chipmakers to reduce production in an attempt to counter falling prices.
However, in the third quarter, Samsung focused on producing more profitable, higher-end chips such as DRAM chips used in artificial intelligence. It also continued to scale back production of older legacy chips. As a result, losses in the memory chip business are estimated to have reduced to around 3 trillion won during this period.
Furthermore, prices of DRAM chips used in tech devices began rebounding towards the end of the previous quarter. Analysts predict that prices of NAND Flash chips used in data storage may also start recovering as early as the current quarter. This indicates a winding down of the severe industry downturn that started last year.
Investors eagerly await more detailed earnings information from Samsung, scheduled to be released later this month. They are particularly interested in any changes in prices of legacy chips such as NAND Flash or older DRAM, as it will provide insights into the chip industry’s recovery potential.
Samsung’s revenue is expected to have fallen 13% compared to the same period last year, amounting to approximately 67 trillion won. The company’s mobile business, however, is likely to have reported an operating profit of around 3 trillion won, similar to last year. This can be attributed to the successful launch of its premium foldable smartphones during the quarter, which generated sales despite the sluggish global smartphone market.
Given that the third quarter is typically strong for Samsung’s mobile and display businesses, thanks to the launch of flagship smartphones and increased demand for display panels from clients like Apple, the company is expected to maintain stability in these areas.
In summary, Samsung Electronics has managed to weather the storm in the memory chip market, with a smaller-than-expected drop in its third-quarter profit. The early signs of recovery and stabilizing chip prices have brought optimism among investors. With the preliminary earnings report exceeding expectations, Samsung is well-positioned to capitalize on the rebounding memory chip market while maintaining stability in its mobile and display businesses.
