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Lanon Wee

Samsung Predicted to Have a Major Decline in Profits as Semiconductor Division Struggles

It is forecasted that Samsung Electronics' profits will be substantially diminished by nearly 80% in the third quarter, according to analysts. It is anticipated that Samsung's semiconductor business, usually one of its most profitable divisions, will suffer a loss of more than 3 trillion won ($2.2 trillion) during the third quarter. There is an oversupply of memory chips and weak demand for certain products such as smartphones and laptops, resulting in a decreased price for said chips. Analyst forecasts anticipate a plunge in Samsung Electronics' earnings of almost 80% in the third quarter, as its biggest income generator – semiconductors – faces difficulties. On Wednesday, Samsung will reveal the earnings figures. Polls by LSEG think operating revenue will be 2.3 trillion Korean won ($1.7 billion), which is a year-on-year decline of 78.7%, and 67.8 trillion won in revenue, a fall of 11.6%.As the biggest manufacturer of memory chips globally and the top smartphone provider, Samsung's semiconductor section is predicted to suffer from more than 3 trillion won in losses during the third quarter. Samsung's profits have taken a hit due to a dramatic drop in memory chip prices this year caused by an oversupply and weak demand for end products such as smartphones and laptops. The tech giant has attempted to tackle this by decreasing production, though this is not likely to be reflected in the third-quarter results. According to Daiwa Capital Markets, Samsung's upcoming earnings are expected to miss the consensus estimates due to the higher cost burden resulting from the cut in memory production and the continuing feeble demand for its chip manufacturing unit. Analyst SK Kim predicted that the company's operating profit for the third quarter will be 1.65 trillion won, significantly less than the average analyst estimate of 2.3 trillion won. Nevertheless, two possible optimistic developments for Samsung in the September quarter could be the growth of its display business due to the launch of the new iPhone 15 series (which Samsung supplies displays for) and the improvement in the margins of its smartphone division from the new foldable mobile phones that were introduced in July. Analysts are keeping an eye on indications that the core chip division of Samsung will be stabilized in the quarter ahead. It's currently predicted that operating profit in the fourth quarter will hit 3.8 trillion won, which is 11.5% lower than the same time last year. It's significantly smaller than the losses in the first and second quarters this year. Additionally, it's estimated that sales will be unchanged, halting the loss of sales that has been occurring. Kim from Daiwa believes the surplus will decrease and memory prices will climb in the fourth quarter. In August, Citi reported that Samsung would supply Nvidia's advanced memory chips, which are used for AI purposes. As for further opportunities, Kim believes that this will also provide a lift and "there could be additional chances related to AI demand in 2024."

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