common view of holiday makers are seen at Samsung sales space throughout the chinajoy 2023 at Shanghai new expo heart in Shanghai, China on July 28, 2023 (Photo by Ying Tang/NurPhoto by way of Getty Images)
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South Korea’s Samsung Electronics reported Tuesday quarterly operating profit that was higher than anticipated regardless of dropping 77.6% from a yr in the past.
While it was a decline year-on-year, third quarter operating profit jumped 262.6% from the second quarter, signaling {that a} memory chip glut could also be bottoming out. First quarter operating profit plummeted 85.15% from the fourth quarter of 2022, whereas second-quarter operating profit noticed solely 4.68% enchancment from the primary quarter.
Here are Samsung’s third-quarter outcomes versus estimates:
- Revenue: 67.4 trillion Korean gained (about $50 billion), vs. 67.8 trillion Korean gained expected by analysts polled by LSEG.
- Operating profit: 2.43 trillion Korean gained, vs. 2.3 trillion Korean gained anticipated by LSEG analysts.
Samsung’s income for the quarter ending September fell 12.2% from a yr in the past, whereas operating profit dropped 77.6% in the identical interval.
Earlier this month, Samsung estimated third-quarter income can be 67 trillion Korean gained and operating profit to be 2.4 trillion gained.
The South Korean chip big is the biggest dynamic random-access memory chip maker on this planet. Its memory chips are present in client gadgets such as smartphones and computer systems.
“In the fourth quarter, uncertainties persist concerning the market’s restoration pushed by wars and geopolitical dangers, gradual demand rebound and ongoing buyer stock changes,” stated Samsung throughout its earnings name on Tuesday.
“Nevertheless, we’re observing preliminary indications of demand, regularly stabilizing and bettering, supported by recovering client sentiment, easing inflation and main prospects introducing new merchandise, significantly within the PC and cellular segments,” Samsung stated.
On the outlook for memory demand, Samsung stated it expects fourth quarter demand to decide up with year-end promotions, new product launches by its main prospects as properly as robust demand for generative AI.
Large language fashions such as ChatGPT require lots of high-performance memory chips, which allow such generative AI fashions to keep in mind particulars from previous conversations and person preferences so as to generate humanlike responses.
In a press release forward of its earnings name, Samsung stated that it “obtained quite a few buy inquiries amid widening consciousness of the {industry} reaching a backside, following the industry-wide manufacturing cuts.” It added that it continued to broaden gross sales of advanced-node merchandise.
These advanced-node merchandise embrace DDR5 — double knowledge charge 5 synchronous dynamic random-access memory, and UFS4.0 — flash storage for the 5G period.
“Our view on a significant profit restoration for the subsequent a number of quarters led by memory is undamaged, with the bigger industry-wide manufacturing cuts, regularly bettering demand tendencies, as properly as combine enchancment in the direction of high-average promoting worth merchandise such as DDR5,” stated Goldman Sachs in an Oct. 12 report.
The funding agency maintained a “purchase” score with an unchanged goal worth of 93,000 gained. Samsung shares have been down 0.30% at 67,100 gained on Tuesday morning.
Signs of restoration
Global smartphone sell-through volumes fell 8% year-on-year within the third quarter of 2023, the ninth consecutive quarter to document a decline, according to Counterpoint Research. This was largely due to the slower-than-expected restoration in client demand.
Smartphone and PC maker have been grappling with extra inventories of memory chips after stockpiling to meet elevated demand for client gadgets throughout the pandemic. Inflation has brought about shoppers to rein in spending and reduce on purchases of client gadgets, driving down demand and costs for memory chips.
But the market grew 2% quarter-over-quarter bolstered by a constructive efficiency in September, signaling a market restoration forward.
“We anticipate earnings to rebound from 4Q23, given additional product combine enchancment on increasing gross sales of high-bandwidth memory 3 and a memory worth hike,” stated SK Kim, analyst at Daiwa Capital Markets, in an Oct. 3 observe.
“For memory, we assume a significant narrowing of losses due to an extra product combine enchancment and reversal of stock write-down from the memory worth restoration. For show, we anticipate an extra earnings enchancment on increasing provide of OLED panels for iPhone 15 fashions,” stated Kim.
Continued 2024 momentum anticipated
Samsung stated that will probably be increasing its gross sales of advanced-node merchandise to meet demand for top efficiency chips in generative AI.
“We will actively handle demand for generative AI by rising our HBM3 and HBM3E portion of gross sales on the again of the biggest manufacturing capability within the {industry},” Samsung stated Tuesday, referring to the subsequent era memory processors with excessive bandwidth memory.
Local media reported that Samsung is predicted to provide high-performance DRAM chips and HBM3 to U.S.-based chip designer Nvidia. Nvidia’s shares have surged 187.54% year-to-date thanks to booming demand for its AI chips.
Kim of Daiwa Capital stated they anticipate “rising alternatives associated to AI demand in 2024” for Samsung.
“In addition to supplying HBM3 to Nvidia ranging from 4Q23 and increasing provide in 2024, we anticipate that Samsung Electronics will provide HBM3P, focusing on next-gen AI GPUs from mid-2024,” stated Kim in an Oct. 3 observe.