Chip losses continue, Samsung Q3 operating profit is expected to decline by 80%
Samsung Electronics' operating profit for the third quarter is expected to decline by 80% year-on-year, due to the continued impact of global chip supply surplus, resulting in losses in the company's semiconductor business. Samsung, the world's largest manufacturer of storage chips, smartphones, and televisions, will announce its preliminary profit results for the third quarter on October 11th.
A survey conducted by LSEG SmartEstimate among 19 analysts shows that Samsung Electronics' quarterly operating profit from July to September may drop to 2.1 trillion won (1.56 billion US dollars). By comparison, Samsung's operating profit in the second quarter of last year was 10.85 trillion won.
This reversal is due to Samsung's traditionally largest profitable division, the chip division, possibly reporting quarterly losses of 3 trillion to 4 trillion won after storage chip prices bottomed out and did not recover as quickly as expected.
Analysts say that Samsung's reduction in chip production has also harmed economies of scale and increased chip manufacturing costs. After announcing its first production reduction in April this year, Samsung further reduced production in the third quarter to reduce inventory and cope with the worst industry recession in decades caused by chip overcapacity.
Competitor Meiguang Technology predicted a quarterly loss in September this year, raising concerns about the slow recovery of terminal markets such as the storage chip manufacturer's data center.
Due to concerns about economic recession, smartphone and personal computer manufacturers have been avoiding purchasing new storage chips and choosing to deplete existing inventory within a few months. Analysts say their inventory is currently low enough and expect demand to rebound early next year.
KB Securities stated in a report at the end of September that Samsung recently received its first server storage chip order from a North American data center company in a year, raising hopes that data center customers will also start purchasing chips again.
The strong demand for storage chips used in artificial intelligence (AI) such as high bandwidth memory (HBM) remains a highlight, but Samsung Electronics lags behind its competitor SK Hynix in developing such chips and winning over customers like AI chip leader Avida.
According to the average forecast of five analysts, Samsung's mobile business has an operating profit of approximately 3 trillion won. The company launched high-end foldable screen smartphones in Q3, which has boosted sales despite the global smartphone market downturn.
This reversal is due to Samsung's traditionally largest profitable division, the chip division, possibly reporting quarterly losses of 3 trillion to 4 trillion won after storage chip prices bottomed out and did not recover as quickly as expected.
Analysts say that Samsung's reduction in chip production has also harmed economies of scale and increased chip manufacturing costs. After announcing its first production reduction in April this year, Samsung further reduced production in the third quarter to reduce inventory and cope with the worst industry recession in decades caused by chip overcapacity.
Competitor Meiguang Technology predicted a quarterly loss in September this year, raising concerns about the slow recovery of terminal markets such as the storage chip manufacturer's data center.
Due to concerns about economic recession, smartphone and personal computer manufacturers have been avoiding purchasing new storage chips and choosing to deplete existing inventory within a few months. Analysts say their inventory is currently low enough and expect demand to rebound early next year.
KB Securities stated in a report at the end of September that Samsung recently received its first server storage chip order from a North American data center company in a year, raising hopes that data center customers will also start purchasing chips again.
The strong demand for storage chips used in artificial intelligence (AI) such as high bandwidth memory (HBM) remains a highlight, but Samsung Electronics lags behind its competitor SK Hynix in developing such chips and winning over customers like AI chip leader Avida.
According to the average forecast of five analysts, Samsung's mobile business has an operating profit of approximately 3 trillion won. The company launched high-end foldable screen smartphones in Q3, which has boosted sales despite the global smartphone market downturn.