Samsung’s Q3 Profit Falls Short of Estimates Amid AI Chip Struggles, According to Reuters

Samsung Electronics reported on Tuesday a significant increase in its estimated third-quarter operating profit, projecting a jump of 274%. However, this figure fell short of analysts’ predictions as the company struggled to capitalize on the high demand for chips utilized in artificial intelligence (AI) servers.

The world’s leading manufacturer of memory chips, smartphones, and televisions estimated an operating profit of 9.1 trillion won (approximately $6.78 billion) for the three months ending September 30. In contrast, analysts had anticipated a profit of 10.3 trillion won. This estimate reflects a substantial rise compared to the 2.43 trillion won reported during the same period last year and a decrease from 10.44 trillion won in the previous quarter.

Following the earnings guidance, Samsung’s share price, which has already seen a decline of over 20% this year, dropped by 0.7%.

The company’s memory chip sector experienced a downturn due to increased supply of conventional products from Chinese competitors and inventory adjustments by some mobile clients. While there was robust demand for high-bandwidth memory (HBM) and other chips used in servers, it wasn’t enough to offset the overall decline in earnings.

For three decades, Samsung has maintained its position as the top memory chip producer. However, it now faces intensified competition in both standard and advanced chip markets.

High-margin chips for AI servers are leading a recovery in the chip industry following last year’s post-pandemic slump. Nevertheless, Samsung has been outperformed by rival SK Hynix in supplying HBM chips to AI frontrunner Nvidia.

Analysts note that the demand for commodity chips, crucial for PCs and smartphones, remains weak, which poses challenges for Samsung as it relies on this sector more than its competitors.