Samsung Electronics announced on Wednesday that its preliminary third-quarter profit declined by a smaller-than-anticipated 78%, signaling early signs of recovery in the beleaguered memory chip market. The company’s shares opened 3.3% higher compared to a 1.4% rise in the broader market (.KS11). Analysts suggested that memory chip prices likely hit their lowest point in the third quarter, with some types showing signs of rebound. In a concise preliminary earnings statement, the world’s largest memory chip and smartphone manufacturer estimated that its operating profit for July-September dropped to 2.4 trillion won ($1.79 billion), down from 10.85 trillion won the previous year.
This profit figure exceeded the 2.1 trillion won LSEG SmartEstimate, which is based on forecasts from more consistently accurate analysts.
Ko Yeongmin, an analyst at Daol Investment & Securities, commented, “It’s better than expected. Although the situation is not great in the chip business… the decline in memory prices is easing, and further drops will be limited.” While significantly lower than the previous year, Samsung’s third-quarter profit was well above the first quarter’s 640 billion won, the lowest since 2009, and the second quarter’s 670 billion won.
The company had reported losses of 4.58 trillion won and 4.36 trillion won in its chip business during the first and second quarters, respectively, as memory chip prices plummeted and inventory values were reduced.
A global economic slowdown and higher interest rates had dampened demand for most consumer goods following a pandemic-driven surge, compelling chipmakers to reduce production to mitigate falling prices. In the third quarter, losses in Samsung’s memory chip business likely decreased to around 3 trillion won as the company focused on more profitable, high-end chips like DRAM chips used in artificial intelligence, while continuing to cut production of older legacy chips.
Some DRAM chip prices, used in tech devices, also started to rebound towards the end of the last quarter, and prices of NAND Flash chips used in data storage are expected to recover as early as the current quarter, marking the end of the severe industry downturn that began last year, according to analysts.
Investors will closely watch Samsung’s detailed earnings release later this month, particularly regarding any changes in prices of legacy chips such as NAND Flash or older DRAM, to gain insights into the chip industry’s broader recovery outlook, Ko noted. The detailed earnings report is scheduled for release on October 31.
Samsung stated that its revenue likely fell 13% compared to the same period the previous year, amounting to 67 trillion won. The company’s mobile business is expected to report an operating profit of around 3 trillion won, similar to the previous year, based on the average of forecasts from five analysts. Samsung launched its premium foldable smartphones during the quarter, driving sales despite the sluggish global smartphone market.
The third quarter is typically strong for Samsung’s mobile and display businesses as it is when the company introduces its flagship smartphones, and demand for display panels from clients like Apple (AAPL.O) increases ahead of the latest iPhone release.
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