Despite a year-on-year drop of 77.6%, Samsung reported an operating profit for the third quarter that exceeded expectations. This surge of 262.6% from the previous quarter suggests that the surplus of memory chips might be stabilizing. As the leading producer of dynamic random-access memory chips utilized in many consumer electronics such as mobile phones and computers, Samsung continues to lead the market.
Samsung Electronics of South Korea reported an operating profit for the quarter ending September which was higher than expected, even though it was down 77.6% year-on-year. The figure was 262.6% higher than the second quarter with the first quarter operating profit dropping by 85.15%. Revenue was in accordance with prediction at 67.4 trillion Korean won (about $50 billion) and estimated operating profit was 2.43 trillion Korean won with the predicted being 2.3 trillion Korean won. Samsung is the largest dynamic random-access memory chip producer in the world. Despite the recovery that is expected due to year-end promotions, new products introductions and demand for generative AI, there is still uncertainty in the market due to wars, geopolitical risks and customer inventory adjustments. There has been an increase in demand for advanced-node products such as DDR5 and UFS4.0. While Goldman Sachs maintains a ‘buy’ rating with a target price of 93,000 won, the stock price on Tuesday morning was 67,100 won, down 0.3%.
In the third quarter of 2023, Counterpoint Research revealed that global smartphone sell-through volumes had dropped 8% on a year-on-year basis, marking the ninth consecutive quarter to register a decline. This was mainly caused by a less-than-anticipated customer demand resurgence. Companies manufacturing smartphones and PCs had stockpiled memory components in preparation for an augmented demand for consumer devices during the pandemic, meaning they are now having to contend with excessive inventories. The wallets of customers have become strained due to inflation, so they are being more thrifty in their purchases of consumer devices, resulting in a decrease in requirements for memory components, as well as their prices.
The market saw an uplift of 2% quarter-by-quarter due to favorable performance in September, indicating market recuperation in the days to come. SK Kim, an analyst for Daiwa Capital Markets, stated in a report released on October 3rd that "a product mix improvement with increased sales of high-bandwidth memory 3 alongside a memory price hike should lead to a bounce back in earnings from 4Q23." Additionally, Kim pointed out that the losses due to the memory sector will likely narrow with the rise in memory prices. As for display, further gains are expected with augmented supply of OLED panels for the new iPhone 15 models.
Samsung revealed that they intend to broaden their sales of state-of-the-art components to administer desire for powerful chips in generative AI. They commented, “Given our industry-leading production capacity, we intend to proactively cater to ask for generative AI by boosting our supply of HBM3 and HBM3E.” Media in the region anticipated that Samsung would supply first-class DRAM and HBM3 chips to Nvidia, a chip designer located in the United States. As Nvidia’s AI chips have gained huge demand, it has led to their shares soaring 187.54% within this year.
Kim of Daiwa Capital stated that they anticipate "enhanced possibilities in relation to AI demand in 2024" for Samsung. Kim further commented in an Oct. 3 note that "besides supplying HBM3 to Nvidia from the fourth quarter of 2023 and escalating supply in 2024, Samsung Electronics is expected to provide HBM3P, targeting future AI GPUs from mid-2024."
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