Samsung Electronics quarterly profit is expected to see more than a four-fold jump on Tuesday. The jump in quarterly profit was seen on improving demand for chips, but the pace of its recovery is weakening, as it is slow to cash in on the artificial intelligence (AI) boom.
The world’s top maker of memory chips, smartphones and TVs Samsung’s operating profit, stood at 10.33 trillion won ($7.67 billion) in the quarter ended September 30. This is as per an average from 29 analysts with LSEG SmartEstimate.
Jump in Samsung’s profit
The jump of profit is significant for Samsung from a year earlier of 2.43 trillion won, but little changed from 10.44 trillion won reported in the previous quarter.
The global semiconductor market has been recovering from a downturn last year, driven by chips used in AI servers, but demand recovery for conventional chips used in smartphones and PCs is slowing, analysts said.
Samsung’s Chinese competitors
Samsung, the South Korean company has been scrambling to catch up with smaller rivals SK Hynix and Micron, in a race to supply high-end AI chips to Nvidia. This is while facing growing competition from Chinese rivals for commodity chips.
Samsung’s late response to the higher-margin AI chip market and its higher exposure to China and traditional mobile chips than its peers have made it more vulnerable to geopolitical risks and lackluster demand, analysts say.
Samsung’s chip division’s profit
The chip division of Samsung is expected to swing to an operating profit of 5.5 trillion won from a year earlier, but this will be down 15% from the preceding quarter, also hurt by Samsung setting aside provisions for bonuses, as per report.
DRAM market
“Samsung is more likely to lose the title of number 1 DRAM vendor in case of a softer commodity DRAM market,” Daniel Kim, an analyst at Macquarie Equity Research said in a recent note, referring to dynamic random access memory (DRAM) chips that are widely used in computers and smartphones.
“That is, the conventional DRAM supply glut will likely hurt Samsung far more than SK Hynix.”
Samsung’s profit forecast
The downbeat Samsung profit forecast comes as Micron last month forecast Q1 results ahead of Wall Street estimates and reported the highest quarterly revenue in more than a decade on the back of booming demand for its memory chips used in the AI industry.
Analysts estimated that Samsung’s non-memory chip operation also continued to make a loss in the Q3, as it is struggling to compete with dominant leader TSMC, which counts Apple and Nvidia among its customers.
Layoff’s at Samsung
Samsung is cutting up to 30% of its overseas staff at some divisions, as per report in September, underlining challenges for the company.
Declining sales of Samsung’s premium phones
Sales of Samsung’s premium foldable phones are also likely to disappoint, weighing on the profit of the company. This is as Samsung faces increasing competition from Chinese rivals like Huawei. Samsung’s mobile phone and network businesses posted an operating profit of 2.6 trillion won in the Q3, down by one-fifth from a year earlier, as per report.
Samsung’s earnings report
Samsung will announce its preliminary Q3 earnings on Tuesday before reporting full figures later this month.
Samsung’s stock update
As of October 7, data from the Korea Exchange (KRX) showed that Samsung Electronics share price closed at $45.07 on October 4, down 1.14%. Over the past month, Samsung stock has declined by 13%, falling from $52.06. On October 2, Samsung stock briefly dropped to an intraday low of $44.55 before slightly recovering. It now faces a critical point—whether it can maintain its current level or fall further.
Samsung Electronics share price fell 23% so far this year, lagging SK Hynix’s 23% rise.
