Samsung anticipates 80pc plunge in Q3 profits amid ongoing chip losses
Reuters :
Samsung Electronics’ (005930. KS) third-quarter profit is expected to drop 80 per cent from a year earlier as the effects of an ongoing global chip glut drive losses in what is normally the South Korean tech giant’s cash cow business, reports Reuters.
The world’s biggest maker of memory chips, smartphones and televisions will announce its third-quarter preliminary earnings results on Wednesday.
Operating profit likely fell to 2.1 trillion won (USD 1.56 billion) in the July-September quarter, according to an LSEG Smart estimate from 19 analysts, weighted toward those who are more consistently accurate.
It compares with an operating profit of 10.85 trillion won in the September quarter last year.
The reversal is because its chip division, traditionally its biggest earner, likely reported quarterly losses of between 3 trillion and 4 trillion won after rock-bottom memory chip prices did not recover as fast as some had predicted.
Analysts said Samsung’s cuts to chip production also hurt economies of scale, lifting the costs of making chips.
After first announcing an output cut in April, analysts said Samsung slashed more production in the third quarter to reduce inventory and weather a chip glut driving the worst industry downturn in decades.
Rival Micron Technology (MU.O) forecasted a quarterly loss last month, triggering concerns of a sluggish recovery in the memory chip maker’s end markets such as data centres.
Smartphone and personal computer makers have been refraining from buying new memory chips, opting to use up their existing inventory for months on concerns of an economic downturn.
Their inventories are now low enough that demand is expected to rebound by early next year, analysts said.
Samsung received its first order in a year for server memory chips from a North American data centre firm recently, KB Securities said in a note late last month, raising hopes that data centre clients will also start buying chips again.
