SEOUL, Samsung Electronics Co. said Tuesday its operating profit sank nearly 80 percent due to a protracted economic slowdown but its semiconductor business reduced losses on rising demand for premium memory chips.
The world's largest memory chip and smartphone maker logged an operating profit of 2.43 trillion won (US$1.8 billion) for the July-September period on a consolidated basis, down 77.6 percent from 10.9 trillion won a year earlier, according to a regulatory filing.
From a quarter earlier, the quarterly operating profit more than tripled from 668.5 billion won.
Sales fell 12.2 percent to 67.4 trillion won and its net income tumbled 37.8 percent to 5.84 trillion won from a year earlier.
The operating profit was 32.6 percent higher than the average estimate, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency. The estimate of net profit was not available.
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Samsung Electronics Co.'s earnings results
Samsung's Device Solutions division, which oversees its cash-cow chip business, made losses of 3.75 trillion won, marking the division's third consecutive quarter of losses. The chip business' cumulative losses amounted to 12.7 trillion won for 2023.
Its sales totaled 16.4 trillion won for the three months through September.
In the first quarter, Samsung's chip division reported its first financial loss in 14 years, as chip inventories grew significantly amid tapering global demand. Prior to that, the division recorded losses in the first quarter of 2009.
But Samsung pointed to some positive forecasts that the chip cycle has bottomed out.
Its memory chip business saw its losses decrease thanks to increasing sales of premium products like high bandwidth memory (HBM) and double data rate 5 (DDR5).
Also, the company has received a number of purchasing inquiries from customers to stock up on parts.
Samsung said its mobile division posted 44.2 trillion won in sales and 3.7 trillion won in operating profit on brisk sales of its new foldable smartphones, including Galaxy Z Flip 5 and Fold 5.
In an earnings call, the company hinted that its upcoming flagship smartphone, the Galaxy S24, will feature new generative artificial intelligence (AI) functions to provide a user-friendly experience.
The announcement came weeks after Samsung unveiled the Exynos 2400, its next-generation AI-powered mobile processor, which is expected to be used in the Galaxy S24 and the Galaxy S24+ slated for early next year.
Samsung spent 11.4 trillion won on infrastructure investment, including 10.2 trillion won for chips, for the July-September period.
Samsung Electronics Co.'s semiconductor manufacturing facility in Austin, Texas, is seen in this photo provided by the company.
In the fourth quarter, Samsung said its flagship semiconductor business is expected to see its bottomline improve on a rise in demand for premium memory chips used in AI-powered products and services and on a rebound in memory chip prices.
The company said it will focus on expanding sales of its high-performance chip lineups like DDR5 and HBM3 in the coming quarter.
In a recent event held in the United States, Samsung unveiled its fifth generation HBM3E chip Shinebolt as its key product to take the lead in the prominent AI semiconductor market.
It will likely parallel SK hynix's HBM3, which is provided to U.S. tech giant Nvidia Corp.
Samsung said it has plans to increase its HBM chip production capacity by more than 2.5 times next year, with mass production of the up-to-date HBM3E scheduled for the first half.
"We are ramping up business for the new HBM3 and HBM3E and have already finalized discussions with key customers for next year's supply," 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."
Shares of Samsung Electronics dropped 0.59 percent to close at 66,900 won, outperforming the broader KOSPI's 1.41 percent fall Tuesday. The earnings report was released before the market opened.
Source: Yonhap News Agency