Samsung's operating profit in the third quarter decreased by 78% year-on-year, and chip business losses narrowed

On October 31st, Samsung Electronics Co., Ltd

On October 31st, Samsung Electronics Co., Ltd. in South Korea released its third quarter financial report as of September 30, 2023 on Tuesday. The financial report shows that the revenue for the quarter was 67.4 trillion Korean won (approximately 50 billion US dollars), a year-on-year decrease of 12%; The operating profit was 2.4 trillion Korean won (approximately 1.78 billion US dollars), a year-on-year decrease of 78%; The net profit was 584 trillion won (approximately 4.3 billion US dollars), a year-on-year decrease of 37.8%.

Samsung Electronics stated that its operating profit for the third quarter was 2.4 trillion won, which is basically in line with analysts' average expectations. Despite the sustained economic downturn, operating profit decreased by 78% compared to the same period last year's 10.85 trillion won (approximately $8.05 billion), but it is still much higher than the 640 billion won (approximately $470 million) in the first quarter and 670 billion won (approximately $500 million) in the second quarter.

Samsung Electronics had a net profit of 584 trillion won in the third quarter, more than double the widely estimated 2.52 trillion won ($1.87 billion) by analysts. The revenue was 67.4 trillion won, slightly lower than analysts' consensus estimate of 67.62 trillion won (approximately $50.2 billion).

In the quarter, the loss of Samsung Electronics' storage chip business decreased from 4.36 trillion won (approximately 3.2 billion US dollars) in the previous quarter to 3.75 trillion won (approximately 2.78 billion US dollars) as the company focused on advanced chips such as artificial intelligence DRAM chips with higher profits and continued to reduce production of old chips.

This is the third consecutive quarterly loss for Samsung's electronic chip division. Since 2023, the department has accumulated losses exceeding 12.7 trillion won (approximately 9.4 billion US dollars). The department's revenue in the third quarter was 16.4 trillion won ($12.2 billion).

In the first quarter of this year, Samsung Electronics' chip division reported its first financial loss in 14 years, due to a decrease in global demand and a significant increase in chip inventory. Prior to this, the department suffered a loss in the first quarter of 2009.

This is also the highest quarterly operating profit recorded by Samsung Electronics so far this year, indicating that demand may gradually recover in 2024 as the battered storage chip market begins to show signs of rebound.

Before Samsung released its financial report, Apple announced that it would launch new customized chips, continuing the trend of major manufacturers developing chips independently.

Last week, SK Hynix, a competitor of Samsung Electronics, stated that the artificial intelligence boom has driven the growth of demand for DRAM chips. As customers place orders and chip prices stabilize, the impact of reduced production by storage chip manufacturers is beginning to manifest.

Samsung stated in a statement that by 2024, the increase in artificial intelligence capabilities on devices will increase the demand for DRAM chips in high-end products. The company added that the arrival of some product update cycles next year will "potentially restore growth in demand for personal computers and mobile devices".

Samsung Electronics also stated on the same day that foldable smartphones such as the Galaxy ZFlip5 and Fold5 were selling well, bringing the mobile department's sales to 44.2 trillion won (approximately $32.8 billion) and operating profit to 3.7 trillion won (approximately $2.7 billion).

Looking ahead to the fourth quarter, Samsung Electronics expects its chip division to focus on selling high value-added products such as high bandwidth memory (HBM) while strengthening its technology leadership position.

With the arrival of the holiday shopping season, Samsung expects the smartphone market to grow and competition to intensify, especially in the high-end smartphone market. Competition in the mass market sector will also intensify, and market uncertainty is expected to remain due to ongoing geopolitical instability.

For 2024, Samsung Electronics expects that although macroeconomic uncertainty may persist, the memory market is expected to recover. The memory department will strive to expand the sales of advanced node products to meet the demand for high-performance and high bandwidth products.

As consumer confidence stabilizes with expectations of global economic recovery, demand for smartphones is expected to rebound, and growth in the high-end market is expected to continue.

As for the OEM business, the second generation 3-nanometer process will begin mass production, and a new factory located in Taylor, Texas, USA will begin operation.(Small)