Samsung stands tall thanks to the popularity of foldable phones

Products including foldable smartphones are displayed at a Samsung Electronics experience store in Seocho-gu, Seoul, on March 31, after the company announced a preliminary consolidated operating profit of 2.43 trillion won for the third quarter of this year. By Kwon Do-hyun

Samsung Electronics posted an operating profit more than triple that of the previous quarter, thanks to the popularity of foldable smartphones. Samsung’s memory business also reduced its losses by expanding sales of high value-added DRAM products, such as high bandwidth memory (HBM). Growth is expected to continue in the fourth quarter, driven by demand for generative artificial intelligence (AI). On October 31, Samsung Electronics announced that it reported 67.4 trillion won in consolidated sales and 2.43 trillion won in operating profit in the third quarter. This was the first time this year that the company’s quarterly operating profit exceeded a trillion won, recording more than triple the company’s operating profit in Q2 (670 billion won).

In particular, new foldable smartphones accounted for most of the profit. The Device eXperience (DX) Division, which handles smartphones and home appliances, posted sales of 44.02 trillion won and operating profit of 3.73 trillion won. This was driven by the success of Galaxy Z Flip5 and Galaxy Z Fold5, two foldable smartphones launched in August. However, the company said it expected a slower performance in the fourth quarter due to a longer replacement cycle of smartphones.

The Device Solutions (DS) Division posted sales of 16.44 trillion won and an operating loss of 3.75 trillion won. The DS Division also recorded losses of 4.58 trillion won and 4.36 trillion won in the first and second quarters, respectively. The third quarter recorded a smaller loss. According to Samsung, the division reduced losses as sales of high value-added products, such as HBM, DDR5 and LPDDR5x, and selling prices for some products increased. The company expected market demand for DRAM to increase by 10% in Q4 of this year.

In addition, the memory demand for generative AI is increasing, and sales of HBM, which is considered a related pie, are expected to gradually increase. Earlier, SK Hynix achieved a quarterly DRAM profit before Samsung Electronics, and reportedly, the sales of HBM, which has a profit margin more than five times higher than general DRAMs contributed significantly.

“In order to maintain our HBM supply capacity at the highest level in the industry next year, we plan to secure more than 2.5 times the production capacity compared to this year,” said Kim Jae-june, executive vice president of Samsung’s memory business, adding, “We have already completed supply contracts with our major clients for next year.”

Samsung Electronics’ capital expenditure in the third quarter reached 11.4 trillion won, including 10.2 trillion won in the DS Division and 700 billion won in the Samsung Display Corporation (SDC). Spending on memory will be concentrated on completing the P3 infrastructure and progressing the P4 framework in Pyeongtaek, Gyeonggi, as well as on more investment in R&D. The company will also invest to secure HBM production capacity.

Samsung Electronics expects its full-year capital expenditure for 2023 to reach 53.7 trillion won, the largest ever.