Samsung Electronics Quarterly Profit Preview

By Hyunjoo Jin

SEOUL (Reuters) – Samsung Electronics is expected to announce a more than four-fold increase in quarterly profit on Tuesday, driven by rising demand for chips. However, the pace of the recovery appears sluggish, particularly as the company struggles to leverage the artificial intelligence boom.

Analysts predict Samsung’s operating profit for the quarter ending September 30 will reach 10.33 trillion won ($7.67 billion), based on a survey of 29 analysts by LSEG SmartEstimate. This is a significant increase from 2.43 trillion won a year prior, but only a slight decrease from 10.44 trillion won in the previous quarter.

The global semiconductor market is recovering from a downturn last year, largely due to chips utilized in AI servers. However, demand for traditional chips used in smartphones and PCs is faltering, as indicated by analysts.

Samsung, the leading producer of memory chips, smartphones, and TVs, is in a fierce competition to supply high-end AI chips to Nvidia, trailing behind rivals SK Hynix and Micron. Additionally, it faces stiff competition from Chinese companies in the commodity chips market.

Estimates suggest that Samsung’s core chip division will switch to an operating profit of 5.5 trillion won, down 15% from the previous quarter but up from a year ago. This decline is attributed to the company setting aside provisions for bonuses.

Analysts highlight that Samsung’s delayed entry into the lucrative AI chip market, coupled with its greater exposure to traditional mobile chips and the Chinese market, has increased its vulnerability to geopolitical risks and sluggish demand.

Daniel Kim, an analyst at Macquarie Equity Research, noted, “Samsung is more likely to lose the title of number 1 DRAM vendor in the event of a softer commodity DRAM market,” indicating that Samsung could suffer more from the conventional DRAM supply glut than its competitor SK Hynix.

The pessimistic outlook comes as Micron recently projected first-quarter results that exceeded Wall Street estimates, marking its highest quarterly revenue in over a decade, fueled by strong demand for AI-related memory chips.

Analysts also anticipate that Samsung’s non-memory chip operations, which encompass chip designing and contract manufacturing, will continue to show losses in the third quarter. This sector struggles to compete with industry leader TSMC, which serves clients like Apple and Nvidia.

To address these challenges, Samsung is reportedly cutting up to 30% of its overseas workforce in some sectors, as highlighted by a Reuters report in September. Competitively, sales of Samsung’s premium foldable phones are projected to fall short, impacting its profits amid rising rivalry from Chinese companies like Huawei.

The mobile phone and network unit of Samsung recorded an operating profit of 2.6 trillion won for the third quarter, down 20% from the previous year, based on estimates from 10 analysts.

Samsung Electronics’ stock has tumbled 23% this year, contrasting with a 23% rise for SK Hynix.

The company is scheduled to reveal its preliminary third-quarter results on Tuesday, followed by a detailed report later in the month.

(Exchange rate: $1 = 1,336.3900 won)