Samsung Q3 profit beats expectations

Samsung Q3 profit beats expectations
Source: Reuters

Today, Samsung Electronics (005930.KS) said that its first-quarter profit for the third quarter fell by a less than anticipated 78%, as the battered memory chip market begins to show early signs of rebounding from a severe downturn.

In contrast to a 1.4% increase in the overall market (.KS11), Samsung’s shares opened 3.3% higher. Analysts speculated that memory chip prices had likely peaked in the third quarter, with some varieties already beginning to rise.

In a brief preliminary earnings announcement, the largest memory chip and smartphone manufacturer in the world estimated that its operational profit decreased to 2.4 trillion won ($1.79 billion) in July-September from 10.85 trillion won the previous year.

The earnings exceeded an LSEG SmartEstimate of 2.1 trillion won, which is biased toward expert projections that are more reliably accurate.

“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,” stated Ko Yeongmin, a Daol Investment & Securities analyst.

Samsung’s third-quarter earnings were significantly higher than both the first quarter’s 640 billion won—the lowest since 2009—and the second quarter’s 670 billion won, although they were significantly lower than the previous year.

As memory chip prices fell and its inventory values plummeted, the company recorded losses in its semiconductor division for the first and second quarters, respectively, of 4.58 trillion won and 4.36 trillion.

Following a pandemic-driven boom, demand for most consumer products was reduced by a worldwide economic slowdown, which forced chipmakers to reduce production in an effort to stop dropping prices.

However, analysts reported that in the third quarter, Samsung’s memory chip losses probably decreased to about 3 trillion won as the company continued to reduce manufacturing of older legacy chips in favor of more lucrative, higher-end chips like DRAM, which are utilized in artificial intelligence.

As the severe industrial slowdown that started last year comes to an end, analysts predict that prices of NAND Flash chips, which are used in data storage, may start to rise as early as this quarter. Prices of select DRAM chips, which are used in electronic gadgets, also started to rebound toward the end of the previous quarter.

“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 stated.

October 31st is when the detailed earnings release is due.

Samsung reported that its income, which came to 67 trillion won, probably decreased by 13% from the same time last year.

An average of projections from five analysts indicates that the company’s mobile division probably earned an operating profit of about 3 trillion won, comparable to the previous year. Despite the weak global smartphone market, the company’s premium foldable smartphone debut during the quarter resulted in strong sales.

Since Samsung releases its flagship devices in the third quarter and demand for display panels from customers like Apple (AAPL.O) increases ahead of the release of the newest iPhone, the third quarter is typically a good time for the company’s mobile and display divisions.

Credits: Reuters

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