Samsung Electronics reported a significant decline in its chip business profits during the third quarter, citing sluggish recovery in demand for computers and mobile devices. The operating profit for the chip division fell 40% quarter-on-quarter to 3.86 trillion won. The company anticipates continued weak demand into the next quarter, although they are poised to supply HBM3E chips to major customers, likely including Nvidia, by expanding sales in the last quarter of the year.
The company's overall financial results for the third quarter showed revenue of 79.1 trillion won (approximately $57.3 billion), marking a 7% increase from the previous year. However, operating profit decreased to 9.18 trillion won, despite surpassing Samsung’s initial forecasts. Net profit rose significantly by 72.9% year-on-year to 10.1 trillion won.
Business unit performance varied: The Mobile and Network (MX/NW) segment benefited from new product launches, with combined revenue reaching 30.52 trillion won, a 2% increase. The chip division (DS), while growing its revenue by 112% year-on-year to 29.27 trillion won, fell short of market expectations. The Display and Digital Appliances (SDC) unit saw revenue decrease by 3% to 8 trillion won.
The decline in chip profits highlighted challenges such as inventory adjustments affecting mobile demand, costs from employee incentives, and a weaker U.S. dollar. Samsung forecasts a continued strong demand in AI, while expressing a conservative outlook for the SDC business and anticipating a revenue decline in the DX segment.
In contrast, competitors like TSMC and SK Hynix reported record profits in the same period, underscoring Samsung's struggles in effectively commercializing HBM technology. Analysts noted that Samsung's lag in the AI chip sector has led to a 32% drop from its July stock price peak, erasing $122 billion in market value.
Despite the challenges, Samsung announced progress in HBM3E chip production, signaling plans to significantly increase sales in the upcoming quarter. This development has the potential to positively impact its business with major clients such as Nvidia. Samsung shares initially rose over 3.5%, but gains narrowed to 0.68%.
