Samsung expects best profit since 2022, as AI boom squeezes commodity chip supply
- Q3 profit seen at 12.1 trillion won v 10.1 trillion won LSEG estimate
- Samsung sees revenue rising 8.7% to 86 trillion won
- Chip business performed better than expected, analysts say
SEOUL, Oct 14 (Reuters) – Samsung Electronics (005930.KS), on Tuesday said it expects its biggest quarterly profit in over three years, as the global race to boost production of AI chips has tightened supply and driven up prices of conventional memory chips, the tech giant’s mainstay.
Strong demand for conventional memory chips used in data centre servers helped offset weaker sales of advanced artificial intelligence chips of Samsung, which has been lagging rivals in the race to supply to Nvidia (NVDA.O), analysts said.
The world’s leading memory chipmaker estimated an operating profit of 12.1 trillion won ($8.5 billion) for the July-September period, up 32% from a year earlier and well above a 10.1 trillion won LSEG SmartEstimate. That would mark its best quarterly profit in 13 quarters.
Samsung shares slipped 0.5% as of 0302 GMT after rising as much as 2.9% earlier to their highest level since January 2021. Analysts attributed the decline to profit-taking following the rally. The stock has risen about 75% this year.
Ryu Young-ho, a senior analyst at NH Investment & Securities, said:
The third-quarter earnings surprise came from the chip business,
Strong demand for conventional memory to support general-purpose servers, combined with robust HBM demand for AI servers, have together fuelled overall memory demand, he said.
Although progress in supplying advanced high bandwidth memory (HBM) chips to major clients such as Nvidia (NVDA.O), was slower than expected, gains in commodity memory, supported by tight supplies, helped cushion the impact, analysts said.
Sohn In-joon, an analyst at Heungkuk Securities, said:
Samsung is a big beneficiary of growing demand for commodity chips,
Sohn attributed the earnings beat to stronger-than-expected prices of commodity DRAM and NAND chips, stemming from demand for data centre servers, and lower chip inventory by chipmakers that gave them bargaining power in pricing.
Analysts said Samsung also benefited from narrower losses at its foundry unit, which makes logic chips, as utilisation rates helped ease fixed-cost pressures.
The company said revenue would likely rise 8.7% to a record high of 86 trillion won from a year earlier, also helped by the weaker South Korean currency.
Samsung is expected to release detailed results including a breakdown of earnings for each of its businesses on October 30.
Expanding on its stock incentives for senior executives, the company has decided to launch a performance-linked stock compensation plan for all employees in South Korea over the next three years, according to an internal memo dated October 14, seen by Reuters. Samsung declined to comment on the plan.
SHORTAGE STOKES CONVENTIONAL CHIP PRICES
Analysts said memory makers’ focus on investing in advanced chips in recent years may have limited the production of conventional chips, which extended a supply shortage and spurred price increases for.
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Samsung expects best profit since 2022, as AI boom squeezes commodity chip supply, source
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