Samsung Predicted To Lose 80% Profit In The Third Quarter Due To Chip Surplus

Samsung chip illustration. (photo: dock pexels)

JAKARTA - Samsung Electronics is expected to experience a decline in profits by 80% from the previous year in the third quarter. This is the impact of a continuing global chip surplus that causes losses in the main business of this South Korean technology company.

The world's largest company in the production of memory chips, smartphones and television announced revenues from the start of its third quarter on Wednesday, October 11.

Operational gains are likely to drop to 2.1 trillion won (IDR 24.5 trillion) in the July-September quarter, according to LSEG SmartEstimate from 19 analysts, weighing mainly on those with more consistent accuracy.

This is compared to operating gains of 10.85 trillion won (IDR 126.9 trillion) in the September quarter last year.

This chaos is due to the chip division, which is usually the company's biggest revenue contributor, likely reporting a quarterly loss of 3 to 4 trillion won after the price of a memory chip that was at its lowest point did not recover as quickly as some predictions.

Analysts say Samsung's cutting of chip production also undermines the economic scale, increasing chip production costs.

After announcing its first output cuts in April, analysts said Samsung reduced production even more in the third quarter to reduce supplies and deal with chip overloads that pushed for the worst industry decline in decades.

Micron Technology's competitors forecast quarterly losses last month, sparking fears of a slow recovery in the end market of memory chip manufacturers such as data centers.

Cell phone and personal computer manufacturers have been reluctant to buy new memory chips, preferring to use their existing stock for months for fear of an economic slowdown.

Their stock is now low enough that it is expected that demand will improve early next year, analysts said.

Samsung received its first order in a year for a server memory chip from North American data center company KB Securities said in a late-month note, raising hopes that data center clients would also start buying chips again.

High demand for memory chips used in artificial intelligence such as high bandwidth memory (HBM) is still a bright spot, but Samsung lost compared to SK Hynix's rivals in developing this kind of chip and securing clients such as the leader of Nvidia's artificial intelligence chips.

The Samsung mobile business is likely to report an operating profit of around 3 trillion won (Rp35 trillion), according to estimates from five analysts, as the company launched its premium foldable smartphones during the quarter, increasing sales despite the sluggish global smartphone market.