The high dependence of Samsung Electronics’ sales on the situation in the memory chip market, as noted by Reuters, does not give industry analysts the most optimistic expectations regarding the dynamics of this company’s operating profit. As expected, this amount fell 80% year-over-year to $1.56 billion in the most recent quarter. So that’s five times less than in the third quarter of last year.
Samsung Electronics will report preliminary third-quarter results later this week. According to analyst forecasts, the Korean giant suffered losses of $2.2 billion to $2.96 billion in the semiconductor products segment in the third quarter. Memory prices fell rapidly and the recovery in demand was not as quick as optimists had expected. Samsung’s unprecedented decision to cut memory production led to lower profit margins as fixed costs remained the same or even increased while product sales fell. The company was forced to reduce memory production volumes at least twice in the second and third quarters.
There is still excess memory in the warehouses of customers in the PC and smartphone segments, so device manufacturers are not yet in a hurry to purchase new batches of memory chips again. Only at the beginning of next year will it be possible to sell the existing stocks of memory chips, after which the manufacturers’ customers will move on to new purchases.
Late last month, Samsung Electronics received its first contract this year to supply memory chips from a major U.S. company that specializes in building data centers, according to KB Securities. This gives hope that other companies operating server equipment will soon follow suit. Unfortunately, Samsung cannot yet boast the same market positions as its competitor SK Hynix in the segment of computing accelerators using the latest generation of HBM memory, but progress has been made in this area, so the Korean giant will be able to capitalize on it to beat the boom in artificial intelligence systems.
In the mobile devices segment, in which Samsung Electronics offers smartphones, tablets and wearables, the company posted an operating profit of around $2.2 billion in the third quarter, analysts expect. The foldable smartphones introduced by Samsung found a place in the premium segment, which made it possible to partially compensate for the overall deplorable situation in the smartphone market.