Nadia
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On October 10th, it was reported that Samsung Electronics is expected to see an 80% year-on-year drop in third-quarter profits due to continued losses in its cash cow business, primarily caused by ongoing global chip oversupply.
Samsung, the world's largest manufacturer of memory chips, smartphones, and televisions, is set to release its preliminary earnings results for the third quarter this Wednesday.
According to SmartEstimate predictions from 19 analysts on the London Stock Exchange, Samsung's operating profit for the July to September period is expected to slump to KRW 21 trillion, compared to KRW 108.5 trillion reported for the same quarter last year.
This steep decline is attributed to the fact that the company's largest profit driver historically, the chip division, is anticipated to report a quarterly loss ranging from KRW 3 trillion to KRW 4 trillion. This comes after memory chip prices hit rock bottom and didn't rebound as swiftly as some had predicted.
Analysts note that Samsung's decision to cut chip production has also hurt economies of scale and increased chip manufacturing costs. Following its initial announcement of production cuts in April, analysts report that Samsung further reduced production in the third quarter to deplete inventory and cope with what has been the most severe industry downturn in decades, driven by chip oversupply.
Due to concerns about an economic downturn, smartphone and personal computer manufacturers have been avoiding the purchase of new memory chips, opting instead to deplete existing inventory over several months. Analysts suggest that their inventories are currently at sufficiently low levels, and demand is expected to rebound early next year.
KB Securities, in a report at the end of last month, stated that Samsung had recently received its first server memory chip order from a North American data center company in a year, raising hopes that data center clients will start purchasing chips again.
Strong demand for memory chips used in artificial intelligence, such as High Bandwidth Memory (HBM), remains a bright spot. However, Samsung lags behind competitors like SK Hynix in the development of such chips and in winning clients like AI chip leader NVIDIA.
According to an average forecast from five analysts, Samsung's mobile business is expected to yield an operating profit of around KRW 3 trillion in this quarter. The company launched high-end foldable smartphones during the quarter, boosting sales despite a sluggish global smartphone market.
Samsung, the world's largest manufacturer of memory chips, smartphones, and televisions, is set to release its preliminary earnings results for the third quarter this Wednesday.
According to SmartEstimate predictions from 19 analysts on the London Stock Exchange, Samsung's operating profit for the July to September period is expected to slump to KRW 21 trillion, compared to KRW 108.5 trillion reported for the same quarter last year.
This steep decline is attributed to the fact that the company's largest profit driver historically, the chip division, is anticipated to report a quarterly loss ranging from KRW 3 trillion to KRW 4 trillion. This comes after memory chip prices hit rock bottom and didn't rebound as swiftly as some had predicted.
Analysts note that Samsung's decision to cut chip production has also hurt economies of scale and increased chip manufacturing costs. Following its initial announcement of production cuts in April, analysts report that Samsung further reduced production in the third quarter to deplete inventory and cope with what has been the most severe industry downturn in decades, driven by chip oversupply.
Due to concerns about an economic downturn, smartphone and personal computer manufacturers have been avoiding the purchase of new memory chips, opting instead to deplete existing inventory over several months. Analysts suggest that their inventories are currently at sufficiently low levels, and demand is expected to rebound early next year.
KB Securities, in a report at the end of last month, stated that Samsung had recently received its first server memory chip order from a North American data center company in a year, raising hopes that data center clients will start purchasing chips again.
Strong demand for memory chips used in artificial intelligence, such as High Bandwidth Memory (HBM), remains a bright spot. However, Samsung lags behind competitors like SK Hynix in the development of such chips and in winning clients like AI chip leader NVIDIA.
According to an average forecast from five analysts, Samsung's mobile business is expected to yield an operating profit of around KRW 3 trillion in this quarter. The company launched high-end foldable smartphones during the quarter, boosting sales despite a sluggish global smartphone market.
