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Monday, November 28, 2022

Samsung Profit Plunges In Q3 As Chipmakers Feel Bite

Samsung said on Friday that its third-quarter operating profit likely plunged 32% as weaker memory pricing and demand hit the tech giant.

The South Korean company said it expects operating profit to be between 10.7 trillion won ($7.57 billion) and 10.9 trillion won. It was the first drop in operating profit since 2019.

Samsung reported revenue growth of 75 trillion to 77 trillion won, up 1.3% to 4% year-on-year.

Samsung’s chip business, which includes selling chips for laptops, servers and storage, and making semiconductors, accounts for 70% of its profits.

The company sells NAND and DRAM chips used in devices such as laptops and smartphones to data centers. It also owns a semiconductor manufacturing business. Samsung did not make any comment alongside its third-quarter forecast, but analysts said weaker prices and demand for memory chips may have contributed to lower profits.

Daiwa Capital Markets said in a report on Friday that DRAM and NAND shipments fell 15% and 10% sequentially, while prices fell 19% and 20%, respectively, “leading to earnings.”

The expected drop in profits added to further concerns about the chip industry, which faces weak demand amid a weak global macroeconomic environment.

Advanced Micro Devices reported thursday Preliminary revenue estimates for the third quarter That’s well below its original guidance. The U.S. company cited “a weaker-than-expected PC market and significant inventory adjustment actions across the PC supply chain.”

Samsung rival Micron warned last month that “consumer demand and inventory-related headwinds” were affecting memory makers.

Samsung’s forecast for lower profits hit other chip stocks.In Europe, companies such as Dutch equipment manufacturers Asmar and apple suppliers STMicroelectronics It was lower in early trade.

TSMCThe world’s largest contract chip maker fell in Taiwan trade. However, after the market close in Taiwan, the company reported a 42.6% year-over-year increase in revenue, partially offsetting the pessimism among semiconductor companies. TSMC may be the most important chip maker in the worldwhich makes components for the world’s largest electronics manufacturers, including Apple.

many companies, including Micronis cutting capital spending and reducing inventory, which could help companies like Samsung recover and herald the bottom of the current semiconductor downturn.

“It’s a bottoming signal,” Daiwa Securities Capital Markets analyst SK Kim told CNBC’s “Street Signs Asia” on Friday.

Kim said he expects memory prices to rebound in the first half of next year, adding that Samsung’s stock price is “about to bottom out as well.”

Samsung shares have fallen more than 28% so far this year.

Despite the recent downturn, Samsung developed a roadmap Its semiconductor business aims to start making state-of-the-art chips within five years.

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