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With Persistent Losses In The Chip Segment, Samsung's Q3 Profit Expected To Fall By 80%

With Persistent Losses In The Chip Segment, Samsung's Q3 Profit Expected To Fall By 80%
Samsung Electronics' third-quarter profit is likely to be 80% lower than a year ago, as the impacts of a global chip oversupply cause losses in what is typically the South Korean tech giant's cash cow industry.
On Wednesday, the world's largest manufacturer of memory chips, smartphones, and televisions will release preliminary third-quarter profit figures.
According to an LSEG SmartEstimate from 19 experts, operating profit is anticipated to fall to 2.1 trillion won ($1.56 billion) in the July-September quarter.
It compares to an operational profit of 10.85 trillion won in the previous September quarter.
The shift is due to its semiconductor segment, which has typically been its biggest income, likely reporting quarterly losses of 3 trillion to 4 trillion won after rock-bottom memory chip prices did not rise as quickly as some had projected.
Analysts believe Samsung's cuts to chip production hurt economies of scale, raising chip manufacturing costs.
After initially declaring a reduction in output in April, analysts believe Samsung cut even more output in the third quarter to minimise inventory and weather the worst industry downturn in decades.
Last month, rival Micron Technology anticipated a quarterly loss, raising concerns about a slow recovery in the memory chip maker's end markets, such as data centres.
On the fear of an economic slump, smartphone and personal computer manufacturers have refrained from purchasing new memory chips, preferring to use up their existing inventory for months.
Analysts believe that inventories are now low enough that demand will resume by early next year.
According to KB Securities, Samsung recently received its first order for server memory chips in a year from a North American data centre firm, bolstering hopes that data centre clients will start buying chips again.
Strong demand for memory chips used in artificial intelligence, such as high bandwidth memory (HBM), continues to be a bright light, but Samsung is lagging behind rival SK Hynix in creating such chips and attracting clients such as AI-chip leader Nvidia.
According to an average of five analyst predictions, Samsung's mobile business likely generated an operating profit of roughly 3 trillion won during the quarter, as the company released its premium foldable devices, boosting sales despite the slow global smartphone market.

Christopher J. Mitchell

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