Samsung said on Friday that its operating profit likely fell 32% in the third quarter due to decreased memory chips prices and demand.
The South Korean company forecasts its operational profit to range between 10.7 and 10.9 trillion South Korean won ($7.57 billion). Since 2019, this is the first fall in operational profit.
Samsung reported an increase in income between 75 and 77 trillion Korean won, an increase of 1.3% to 4.0% year-over-year.
70% of Samsung’s profits come from its chip division, which includes selling processors for laptops, servers, and storage as well as producing semiconductors.
The firm provides NAND and DRAM chips utilized in devices ranging from laptops and cellphones to data centers. Additionally, it has a semiconductor manufacturing division.
Analysts anticipate that memory chip prices will continue to fall
The company did not give any comments regarding its prediction for the third quarter, but experts speculated that a decline in memory chip pricing and demand contributed to the decline in profits.
According to a report published by Daiwa Capital Markets on Friday, DRAM and NAND shipments decreased by 15% and 10% quarter-over-quarter, respectively, while prices fell by 19% and 20% quarter-over-quarter, “resulting in a substantial decline in profitability.”
The expected earnings decline adds to the sector’s woes, which are already exacerbated by a weakening global macroeconomic environment and weakening demand.
Analysts anticipate that memory chip prices will continue to fall in the current quarter, resulting in a further decline in Samsung’s fourth-quarter earnings. It is anticipated that demand would not revive until early next year.
The chip collapse might be far more severe than anticipated
Micron Technology became the first memory-chip manufacturer to reduce its investment projections for next year last week, and SK Hynix has hinted at a probable investment reduction.
On Thursday, chipmaker Advanced Micro Devices Inc presented sales forecasts for the third quarter that were almost a billion dollars less than previously projected due to sluggish PC demand, indicating that the chip collapse might be far more severe than anticipated.
A Samsung executive told reporters in the United States on Wednesday that the company is not presently planning a memory chip production decrease, according to Yonhap news agency.
On October 27, Samsung will issue its complete earnings report and conduct briefings for the media and analysts.
Its shares, which have dropped roughly 30% this year, climbed 0.2% in morning trading, compared to the market’s 0.3% decline.
