Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Samsung Q3 profit beats expectations, raising hopes of chip recovery

Published 10/10/2023, 07:49 PM
Updated 10/11/2023, 04:21 AM
© Reuters. The logo of Samsung is seen on the top of a Brussels' office of the company in Diegem, Belgium September 21, 2023. REUTERS/Yves Herman/ File Photo

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) -Samsung Electronics on Wednesday said its preliminary third-quarter profit dropped by a smaller-than-expected 78%, as the battered memory chip market shows early signs of recovering from a severe downturn.

Samsung (KS:005930) shares opened 3.3% higher versus a 1.4% rise in the wider market, as analysts said memory chip prices likely bottomed in the third quarter, with some types starting to rebound.

The world's largest memory chip and smartphone maker estimated its operating profit fell to 2.4 trillion won ($1.79 billion) in July-September, from 10.85 trillion won a year earlier in a short preliminary earnings statement.

The profit beat a 2.1 trillion won LSEG SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate.

"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," said Ko Yeongmin, an analyst at Daol Investment & Securities.

Though down sharply from last 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 reported losses of 4.58 trillion won and 4.36 trillion in its chip business in the first and second quarter respectively, as memory chip prices plunged and its inventory values were slashed.

A global economic slowdown and high interest rates dampened demand for most consumer goods following a pandemic-driven boom, forcing chipmakers to cut production in an attempt to stem falling prices.

But in the third quarter, analysts said losses in Samsung's memory chip business likely shrank to around 3 trillion won as Samsung focused on more profitable, higher-end chips such as DRAM chips used in artificial intelligence, while continuing to cut production of older legacy chips.

Prices of some DRAM chips, used in tech devices, also began rebounding near the end of last quarter, while prices of NAND Flash chips used in data storage may start recovering as early as the current quarter, winding down the severe industry downturn that began last year, analysts said.

"When Samsung announces detailed earnings later this month, investors will be tuning in to what it has to say about any changes in prices of legacy chips such as NAND Flash or older DRAM, in order to form outlooks about the chip industry's more complete recovery," Ko said.

The detailed earnings release is due on Oct. 31.

Samsung's said its revenue likely fell 13% from the same period a year earlier to 67 trillion won.

The company's mobile business likely reported an operating profit of around 3 trillion won, similar to last year, according to an average of forecasts from five analysts. The company launched its premium foldable smartphones during the quarter, drumming up sales despite the sluggish global smartphone market.

© Reuters. Visitors try out Samsung Electronics’ new Galaxy Z Flip 5 and Z Fold 5 foldable smartphones on display during Samsung Galaxy Unpacked 2023 in Seoul, South Korea, July 26, 2023. REUTERS/Kim Hong-Ji/File photo

The third quarter is normally strong for Samsung's mobile and display businesses given that is when it launches its flagship smartphones, and demand for display panels from clients like Apple (NASDAQ:AAPL) rises before the debut of the latest iPhone.

($1 = 1,342.1900 won)

Latest comments

Nonsense ! Data manipulation
IT'S A CONSPIRACY!
Profit beats expectations but still negative.....trust the sock puppet analysts manipulate the datas ....
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.