South Korean Tech Giant Samsung Electronics Faces Profit Slump in Q3
In a surprise move, Samsung Electronics, the world’s leading memory chip manufacturer, has announced that its operating profit for the third quarter is expected to be significantly lower than anticipated. The company’s guidance released on Tuesday revealed that operating profit for the quarter ending September is projected to be around 9.10 trillion won, a 274% increase from last year’s 2.43 trillion Korean won.
However, this figure falls short of analysts’ expectations, who had predicted an operating profit of 11.456 trillion Korean won ($7.7 billion) for the quarter ended Sept. 30. The company’s revenue for the quarter was also expected to hit 81.96 trillion won ($61 billion).
According to Samsung, the decline in profit is attributed to “one-time costs and negative effects” including inventory adjustments by mobile customers and increased supply of legacy products by Chinese memory companies. The company’s memory business has been impacted by delayed shipments of high-bandwidth memory “HBM3E” chips to major customers.
Industry experts have expressed disappointment with Samsung’s performance, citing weak demand for legacy chips used in PCs and smartphones. “Samsung is not taking that market share as aggressively as we have seen in the past. That is the big problem that I think we’re seeing,” said Daniel Yoo, head of global asset allocation at Yuanta Securities Korea.
Analysts have warned that Samsung needs to remain flexible about its memory supply control, as the downfall of conventional DRAM will likely hurt the company more than its smaller rivals. The company has already taken steps to reduce costs, including instructing its subsidiaries to cut 30% of staff in some divisions.
Samsung’s shares have seen a 22% decrease year-to-date, and the company is set to release detailed third-quarter results later this month. The news has sent Samsung’s shares slipping 0.98% following the release of the guidance.
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