Samsung Electronics Reports Sharp Decline in Q3 Operating Profit Despite Positive Signs in Memory Chip Business

SEOUL: Samsung Electronics Co. revealed a significant downturn in its operating profit for the third quarter, even as its semiconductor division showed signs of improvement.

According to Yonhap News Agency, the company logged an operating profit of 2.43 trillion won (US$1.8 billion) for the July-September period. This represents a 77.6 percent decrease from 10.9 trillion won earned in the same period last year.

Quarter-over-quarter, however, the operating profit more than tripled from 668.5 billion won. Sales for the period dropped 12.2 percent to 67.4 trillion won, and net income fell 37.8 percent to 5.84 trillion won compared to a year earlier. The operating profit came in 32.6 percent higher than the average estimate, according to a survey by Yonhap Infomax, the financial data arm of Yonhap News Agency.

Samsung's Device Solutions division, responsible for its semiconductor business, recorded losses of 3.75 trillion won, marking the third consecutive quarter of losses with cumulative losses totaling 12.7 trillion won for 2023. Sales for this division were 16.4 trillion won for the quarter.

Samsung pointed to a decline in losses in its memory chip business, attributed to rising sales of premium products like high bandwidth memory (HBM) and double data rate 5 (DDR5). The company has also received numerous inquiries from customers looking to stock up on components.

Samsung's mobile division reported 44.2 trillion won in sales and 3.7 trillion won in operating profit, buoyed by robust sales of its new foldable smartphones, including the Galaxy Z Flip 5 and Fold 5. The company indicated that its upcoming Galaxy S24 smartphone will feature new generative artificial intelligence (AI) functions.

For the third quarter, Samsung invested 11.4 trillion won in infrastructure, including 10.2 trillion won specifically for chip development. The company anticipates that the next quarter will bring an improved bottom line for its semiconductor business, driven by higher demand for premium memory chips used in AI-powered products and services and by a rebound in memory chip prices.

During a recent event in the United States, Samsung introduced its fifth-generation HBM3E chip, Shinebolt, aimed at capturing a prominent position in the AI semiconductor market. Production capacity for HBM chips is set to increase by more than 2.5 times next year, with mass production of the latest HBM3E slated for the first half of the year.

Samsung Electronics Executive Vice President Kim Jae-joon said, "We plan to actively respond to the ever-increasing demands of the AI market by rapidly transitioning to HBM3E in the second half of next year."

Following the release of the earnings report, shares of Samsung Electronics fell 0.59 percent to close at 66,900 won, outperforming the broader KOSPI's 1.41 percent decline on Tuesday.

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