Samsung Electronics’ Q3 OP down 78% on sluggish chip demand

[Photo by Lee Seung-hwan]

South Korean tech giant Samsung Electronics Co. saw its third-quarter operating profit fall by nearly 78 percent on weak demand for chips.

Samsung Electronics said in a regulatory filing Tuesday that its operating profit for the third quarter stood at 2.43 trillion won ($1.8 billion), down 77.57 percent from the same period a year ago.

The figure was 32.6 percent higher than the market forecast of 1.84 trillion won compiled by Yonhap Infomax Co.

Sales came to 67.45 trillion won in the July-September period, down 12.21 percent on year. Net profit fell 37.76 percent to 5.84 trillion won.

The earning are in line with its guidance announced earlier this month - 67 trillion won in sales and 2.4 trillion won in operating profit.

Losses in the memory segment narrowed and the performance of the mobile and display divisions beat expectations in the third quarter, resulting in the company’s first billion-dollar quarterly operating profit this year.

In the first and second quarters, Samsung Electronics had posted 640.2 billion won and 668.5 billion won, respectively, in operating profit.

By segment, the company’s flagship semiconductor business posted a loss of 3.75 trillion won in the third quarter.

Although the semiconductor loss did not narrow as much as expected, the company is expected to show a more pronounced improvement in the fourth quarter as memory chip prices stabilize and demand for high-performance DRAM and other products rises.

The Device Solutions (DS) division logged a loss of 3.75 trillion won. This is the third consecutive quarterly semiconductor loss. When including the loss of 8.94 trillion won in the first half of the year, the cumulative loss comes to 12.69 trillion won.

However, the loss narrowed by 600 billion won from the loss of 4.36 trillion won in the previous quarter due to higher DRAM average selling price (ASP) and increased shipments.

The DS division’s third-quarter sales was 16.44 trillion.

Memory chips saw a reduction in the loss from the previous quarter due to increased sales of high-value-added products such as high-bandwidth memory (HBM), DDR5, and LPDDR5x, as well as a slight increase in prices in some areas.

System LSI was weak due to delayed demand recovery and inventory adjustments.

The foundry division continued to face weak performance due to factors such as reduced line utilization, but it achieved the largest-ever quarterly orders, led by the high-performance computing (HPC) sector.

The Device Experience (DX) division, which includes the MX (Mobile eXperience) and Consumer Electronics (CE) divisions, reported third-quarter sales of 44.2 trillion won and operating profit of 3.73 trillion won. The MX division, which oversees smartphones, showed solid growth with strong sales of new products in the third quarter, including the Galaxy Z Flip 5, Fold 5, tablets, wearable devices, and more.

Samsung Display Corporation (SDC) reported 8.22 trillion won in sales and 1.94 trillion won operating profit, with a significant increase in the profit of small and medium-sized panels compared to the previous quarter.