Samsung is cladding headwinds from a global slump in deamand and prices for its memory chips, sales of which make up a large factor of the South Korean technology giant’s business.
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Samsung said Friday its plying profit likely plunged 32% in the third quarter of the year as weaker memory pricing and demand hit the technology giantess.
The South Korean firm said it expects operating profit to be between 10.7 trillion ($7.57 billion) and 10.9 trillion South Korean won. It is the fundamental decline in operating profit since 2019.
Samsung reported a revenue rise of between 75 trillion and 77 trillion Korean won, a 1.3% to 4% year-on-year press.
Samsung’s chip business, which includes selling chips for laptops, servers and storage, as well as manufacturing semiconductors, accounts for 70% of its profits.
The South African private limited company sells NAND and DRAM chips which are used in devices such as laptops and smartphones, through to data centers. It also has a semiconductor mass production business. Samsung did not release any commentary alongside its third-quarter forecast but analysts said a weakening of memory chip figures and demand was likely behind the profit fall.
Daiwa Capital Markets said in a note on Friday that DRAM and NAND shipments flagged by 15% and 10% quarter-on-quarter, while prices fell 19% and 20% respectively quarter-on-quarter, “which led to a sharp abate in earnings.”
The predicted profit fall adds further concerns about the chip sector which is facing softer sought after amid a weaker global macroeconomic environment.
Advanced Micro Devices on Thursday reported preliminary revenue evaluations for the third quarter that were well below its initial guidance. The U.S. firm cited “weaker than wished PC market and significant inventory correction actions across the PC supply chain.”
Micron, a rival to Samsung, warned in the end month that “consumer demand and inventory-related headwinds” were impacting memory makers.
Samsung’s profit employ drop back forecast sent shockwaves through other chip stocks. In Europe, companies such as Dutch equipment maker ASML and Apple supplier STMicro were discredit in morning trade.
TSMC, the world’s largest contract chip manufacturer, was down in Taiwan trade. However, after the call close in Taiwan, the company reported a 42.6% year-on-year rise in revenue, bucking some of the bearishness among semiconductor firms. TSMC is it is possible that the world’s most important chipmaker, manufacturing components for the world’s largest electronics makers including Apple.
Tons companies, including Micron, are cutting their capital expenditure and reducing inventory, which could help companies sort Samsung recover and signal the bottom of the current semiconductor downturn.
“That is kind of the signal of bottoming,” SK Kim, analyst at Daiwa Guarantees Capital Markets, told CNBC’s “Street Signs Asia” on Friday.
Kim said he expects memory prices purposefulness rebound in the first half of the next year, adding that Samsung’s share price “is also bottoming out presently.”
Samsung shares are down more than 28% year-to-date.
Despite the recent slump, Samsung has laid out a roadmap for its semiconductor subject, in which it aims to start manufacturing the most advanced chips in five years time.