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Samsung Reports Q3 Earnings Above Forecasts, Boosting Optimism For The Chip Industry

Samsung Reports Q3 Earnings Above Forecasts, Boosting Optimism For The Chip Industry
In light of the damaged memory chip market's tentative signs of recovery from a severe downturn, Samsung Electronics reported on Wednesday that its preliminary third-quarter profit fell by a smaller-than-expected 78%.
In contrast to a 1.4% increase in the overall market, Samsung shares opened 3.3% higher as experts predicted that prices for memory chips peaked in the third quarter, with some types already beginning to recover.
In a brief preliminary earnings announcement, the largest memory chip and smartphone manufacturer in the world estimated that its operating profit decreased to 2.4 trillion won ($1.79 billion) in July-September from 10.85 trillion won a year earlier.
The result exceeded a 2.1 trillion won LSEG SmartEstimate, which gives more weight to analyst projections that are more reliable overall.
"It's better than expected. Although the situation is not great in the chip business... the decline in memory prices is easing, and further drops will be limited," said Ko Yeongmin, an analyst at Daol Investment & Securities.
Samsung's third quarter earnings was significantly higher than the first quarter's 640 billion won, the lowest since 2009, and the second quarter's 670 billion won, while being significantly lower than last year.
The company's semiconductor division suffered losses of 4.58 trillion won and 4.36 trillion won in the first and second quarters, respectively, as memory chip prices fell and the value of its inventory was drastically reduced.
Following a pandemic-driven boom, a worldwide economic slowdown and high interest rates slowed consumer demand for the majority of goods, leading chipmakers to reduce production in an effort to stop prices from plummeting.
However, analysts predicted that losses in Samsung's memory chip division would have decreased to roughly 3 trillion won in the third quarter as the company concentrated on higher-end, more lucrative chips like DRAM used in artificial intelligence while continuing to reduce the production of older legacy chips.
As the severe industrial slowdown that started last year comes to an end, prices of select DRAM chips, which are used in tech gadgets, started to rise near the end of the previous quarter. Meanwhile, prices of NAND Flash chips, which are used in data storage, may start to rise as early as this one, according to analysts.
"When Samsung announces detailed earnings later this month, investors will be tuning in to what it has to say about any changes in prices of legacy chips such as NAND Flash or older DRAM, in order to form outlooks about the chip industry's more complete recovery," Ko said.
On October 31, a thorough earnings report is expected.
According to Samsung, its revenue, which was 67 trillion won during the same period last year, likely decreased by 13%.
An average of five experts' predictions indicates that the company's mobile division most likely earned an operating profit of about 3 trillion won, similar to last year. Despite the weak global smartphone market, the business saw strong sales from the debut of its premium foldable smartphones throughout the quarter.
Given that the third quarter is when Samsung releases its flagship handsets and that demand for display panels from customers like Apple increases prior to the release of the most recent iPhone, the third quarter is typically robust for Samsung's mobile and display businesses.

Christopher J. Mitchell

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