Samsung sees memory recovery next year after profit beat

Samsung Electronics Co. beat profit expectations in the third quarter and predicted a recovery in the semiconductor market next year. 

The world’s largest maker of memory chips and smartphones said on Tuesday that net income fell 40% to 5.5 trillion won ($4.1 billion) in the September quarter, compared with analyst estimates of 2.52 trillion won, according to data compiled by Bloomberg. That’s an improvement from the 86% decline a quarter earlier. 

Samsung’s pivotal chip division posted a 3.75 trillion won operating loss, compared with a 4.4 trillion won loss in the previous quarter. Three analysts polled by Bloomberg had estimated a loss of between 3.6 trillion won and 3.8 trillion won. The company’s mobile panel business also had a “significant increase” in earnings with the flagship model releases from major customers, perhaps including Apple Inc.’s iPhone 15.

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Samsung shares rose as much as 1.5% in early trading Tuesday.

The $160 billion memory chip market has been battered by a downturn in demand for smartphones and personal computers, the most important products that incorporate the semiconductors from Samsung and rival SK Hynix Inc. Prices for memory chips tumbled, and most chipmakers pulled back on investments in new capacity. Investors have been desperate for signs of a recovery.

When Samsung reported preliminary results earlier this month, its revenue slid 13% in the quarter and operating income dropped 78%, but the profit decline was more modest than the previous quarter and its stock rallied. Then Intel Corp. predicted a return to sales growth in the fourth quarter, in part because of improving personal computer demand and its stock surged the most in nearly three years.

Samsung predicted that memory chip prices will rise in the fourth quarter compared with the current quarter. It said overall demand for such components will rise with the development of artificial intelligence applications.

The company said it will allocate about 53.7 trillion won for overall capital spending this year, compared with 53.1 trillion won last year. Some 47.5 trillion won of that will go to semiconductor capital expenditures, down slightly from 47.9 trillion won in 2022.

Tuesday’s report of Samsung’s full quarterly earnings comes weeks after the US granted the company and SK Hynix an exemption to acquire the equipment they need to sustain and expand their chipmaking operations in China. That’s lifted some uncertainty hanging over the two memory leaders, allowing them to operate in the world’s biggest chip arena over the longer term.

The two Korean chipmakers are locked in a race to develop tools needed to train AI, with Samsung now playing catchup to SK Hynix, the sole supplier of next-generation DRAM to AI chipmaker Nvidia Corp. Samsung has said it plans to double its capacity to make high-bandwidth memory, which has the capacity needed to speed up AI training, by 2024.