Samsung Electronics reported a rise in third-quarter earnings, but the pace of recovery slowed as the company faced challenges in capitalizing on the AI boom. Despite its status as the leading memory chip manufacturer globally, Samsung has struggled to match the success of rivals like TSMC and SK Hynix in the AI-driven chip market.
The company's operating profit for the third quarter was 9.2 trillion won (approximately $66.6 billion), up from 2.4 trillion won the previous year, but a decline from 10.4 trillion won in the prior quarter. This was slightly above the preliminary estimate of 9.1 trillion won. Samsung's stock fell in early trading, with shares down 0.51% and the KOSPI index dropping 1.15%. Year-to-date, Samsung's stock has decreased by 26.13%.
Looking ahead to the fourth quarter, Samsung anticipates limited profit growth due to constrained performance in its chip division, counterbalanced by weaker results in its smartphone, television, and home appliance segments. Samsung had earlier apologized for its disappointing performance, citing delays in advanced chip sales to a major customer and increased competition from Chinese rivals in traditional chip supply.
In a challenging chip market, AI has stood out as a key area of interest. However, Samsung has lagged behind in supplying high-end chips like HBM compared to SK Hynix and has not surpassed TSMC in outsourced chip manufacturing. This has exposed Samsung to the impact of weak traditional chip demand.
Samsung's chip division posted a 3.9 trillion won operating profit for the third quarter, a significant improvement from last year's 3.8 trillion won loss, yet still a 40% drop from the previous quarter's 6.45 trillion won. In contrast, SK Hynix achieved a record 7 trillion won (about $50.72 billion), marking a 29% quarter-over-quarter increase. TSMC also exceeded expectations with stellar AI chip sales to industry leader Nvidia, reporting 360.77 billion Taiwan dollars (around $112.81 billion), a 58% year-on-year increase.
The outlook for the semiconductor market remains cautious, with Samsung predicting continued weak demand in the upcoming quarter. The company also noted that its chip profits were impacted by one-off expenses, such as employee incentives and currency exchange effects due to a weaker dollar.
Additionally, Samsung faces competition in its core memory chip business and in the foundry sector, where it designs and manufactures logic chips for clients. Analysts indicate that Samsung's logic chip division faced widening losses in the third quarter. Meanwhile, its mobile device business saw operating profit decline to 2.8 trillion won from 3.3 trillion won a year ago.
