Chip losses continue, Samsung's third quarter profit is expected to decline by 80%

On October 10th, according to the prediction of 19 analysts on the London Stock Exchange, Samsung Electronics' operating profit for July to September may drop to 2.1 trillion won, a year-on-year decrease of 80%

On October 10th, according to the prediction of 19 analysts on the London Stock Exchange, Samsung Electronics' operating profit for July to September may drop to 2.1 trillion won, a year-on-year decrease of 80%. This is due to the continuous impact of global chip supply surplus, which has led to losses in Samsung's largest profitable division, the chip division.

Analysts say Samsung's chip division may experience a quarterly loss of 3 trillion to 4 trillion won as memory chip prices have bottomed out, but their recovery rate is not as fast as some predict. In addition, Samsung's reduction in chip production has also harmed economies of scale and raised chip manufacturing costs.

It is understood that Samsung, after announcing its first chip production reduction in April, cut more production in the third quarter to reduce inventory in response to the current chip oversupply phenomenon.

The main reason for the chip surplus is that smartphone, personal computer manufacturers, and car manufacturers have been avoiding purchasing new storage chips for several months and choosing to run out of existing inventory. According to Samsung's second quarter financial report, Samsung's operating profit in the second quarter was 668.5 billion won, the lowest level in 14 years and a 95% year-on-year drop. The device solutions department of Samsung's electronic chip business suffered an operating loss of 4.36 trillion won in the current quarter, resulting in two consecutive quarters of losses.

However, analysts also indicate that the inventory of downstream manufacturers is already low enough, and demand is expected to rebound by early next year. In addition, in a recent report by KBSecurities, Samsung recently received its first server memory chip order from a North American data center company in a year, raising hopes that data center customers will also start purchasing chips again.

It is worth mentioning that according to the average predicted by five analysts, Samsung's mobile business's operating profit for the third quarter may reach approximately 3 trillion Korean won, as the company launched high-end foldable smartphones this quarter. Despite the global smartphone market downturn, sales of the product have still increased.

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