Samsung Electronics third-quarter profit is expected to fall 80% year-on-year, as the continuing impact of the global chip supply glut led to losses in the South Korean tech giant’s cash cow business.
Samsung, the world’s largest maker of memory chips, smartphones and televisions, will report preliminary third-quarter earnings results on Wednesday.
According to SmartEstimate forecasts from 19 analysts at the London Stock Exchange, Samsung’s operating profit from July to September could fall to 2.1 trillion won, compared with Samsung’s third-quarter operating profit of 10.85 trillion won last year.
That’s because the chip division, traditionally Samsung’s biggest profit-making unit, could report a quarterly loss of 3 trillion to 4 trillion won after memory chip prices bottomed out and didn’t rebound as quickly as some had predicted.
Samsung’s chip production cuts have also hurt economies of scale and raised the cost of chip manufacturing, analysts said.
After first announcing production cuts in April, analysts said Samsung cut production further in the third quarter to reduce inventories and deal with a chip glut that has led to the worst industry downturn in decades.
Smartphone and personal computer makers have been avoiding buying new memory chips out of fear of a recession, choosing instead to deplete existing inventories over several months. Their inventories are now low enough that demand is expected to rebound early next year, analysts say.
Samsung recently received its first server memory chip order in a year from a North American data center company, sparking hopes that data center customers will also start buying chips again, KB Securities said in a report late last month.
Strong demand for memory chips used in artificial intelligence, such as high-bandwidth memory (HBM), remains a bright spot, but Samsung is lagging behind rival SK Hynix in developing such chips and securing customers such as AI chip leader Nvidia.
Samsung’s mobile business is likely to post an operating profit of about 3 trillion won, according to the average forecast of five analysts, after the company launched a high-end foldable smartphone in the quarter that boosted sales despite a sluggish global smartphone market.
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