Samsung Expects Sharp Slowdown in Third-Quarter Profit Growth — Update

By Kwanwoo Jun

Samsung Electronics said it expects third-quarter earnings growth to slow sharply, hurt in part by China's oversupply of lower-end chips eating into its semiconductor margins even as it continued to struggle to make headway in advanced chips.

The world's largest maker of memory chips and smartphones forecast a near-fourfold increase in operating profit, a significant slowdown from the nearly 16-fold surge in the previous quarter and missing street views.

Inventory adjustments at some client smartphone makers and China's increased supply of legacy chips weighed on the quarterly results for its memory-chip segment, the South Korean technology giant said Tuesday. Legacy, or mature, semiconductors are still widely used in cars, planes and home appliances.

The company also attributed the below-consensus earnings to one-off bonus payments.

Samsung didn't provide further details in its preliminary earnings report. It is set to release full quarterly results later this month.

The company estimated an operating profit of 9.100 trillion won, equivalent to $6.76 billion for the third quarter. That compared with 2.430 trillion won a year earlier but fell short of a FactSet-compiled consensus forecast of 11.146 trillion won.

Quarterly revenue likely rose 17% to 79.000 trillion won, it said, also missing analysts' expectations.

The downbeat earnings guidance came amid growing market concerns that the South Korean tech giant could face challenges from weaker-than-expected semiconductor prices and sluggish sales of mobile handsets and personal computers.

Analysts recently issued gloomy earnings outlooks for Samsung and lowered their target prices for the company, citing a delay in its shipments of advanced high-bandwidth-memory chips for artificial-intelligence applications.

Samsung has struggled to catch up with its chip-making rivals in advancing HBM products, a crucial component for AI and other powerful computing devices. Nvidia has been testing Samsung's HBM3E products for qualification, while smaller home-country competitor SK Hynix has mass produced its rival products for the U.S. AI chip giant.

Shares in Samsung have fallen more than 20% this year, significantly underperforming the broader market. The stock was 1.0% lower in early Tuesday trading.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

October 07, 2024 22:37 ET (02:37 GMT)

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