Samsung Electronics is set to announce a substantial increase in its quarterly profits, primarily due to rising demand for chips. However, industry experts warn that the company is struggling to capitalize on the rapid growth in the artificial intelligence (AI) sector, which could impact its long-term profitability. This upcoming financial report will be crucial in evaluating Samsung's current position in the competitive semiconductor landscape.
According to an analysis by LSEG SmartEstimate, Samsung's operating profit for the quarter ending September 30 is expected to reach 10.33 trillion won ($7.67 billion), significantly up from just 2.43 trillion won during the same period last year. However, this figure represents a slight decrease from the 10.44 trillion won reported in the previous quarter, indicating that while profits are climbing, the pace of recovery is not as robust as anticipated.
The global semiconductor market has started to recover from a downturn experienced last year, largely propelled by the demand for chips utilized in AI servers. However, analysts caution that the rebound for traditional chips used in smartphones and personal computers is slowing. This is particularly concerning for Samsung, which has been in a race with smaller competitors like SK Hynix and Micron to deliver high-end AI chips, especially to major clients like Nvidia.
Samsung's chip division, which is vital to its overall business, is projected to post an operating profit of 5.5 trillion won. This marks a recovery from losses experienced last year but reflects a 15% decline from the previous quarter. Factors contributing to this downturn include Samsung’s decision to allocate funds for employee bonuses, further straining its profit margins. Analysts have noted that Samsung's delayed entry into the high-margin AI chip market, coupled with its greater reliance on traditional mobile chips and exposure to the Chinese market, has made it vulnerable to geopolitical risks and inconsistent demand.
Daniel Kim, an analyst at Macquarie Equity Research, expressed concerns regarding Samsung’s competitive position in the dynamic random access memory (DRAM) sector. He noted, "Samsung is more likely to lose the title of number 1 DRAM vendor in case of a softer commodity DRAM market." This statement highlights the potential consequences of a supply glut in the conventional DRAM market, which could disproportionately impact Samsung compared to its rivals.
This cautious outlook for Samsung comes in stark contrast to Micron, which recently forecasted first-quarter results that exceeded Wall Street expectations. Micron also reported its highest quarterly revenue in over ten years, driven by soaring demand for memory chips in the AI industry, underscoring the growing competitive pressures on Samsung.
Additionally, analysts project that Samsung's non-memory chip operations—encompassing chip design and contract manufacturing—will continue to operate at a loss in the third quarter. The company has struggled to gain traction in this space, facing fierce competition from industry leader TSMC, which serves high-profile clients like Apple and Nvidia.
As Samsung navigates these challenges, it has also initiated significant staff reductions, reportedly cutting up to 30% of its overseas workforce in specific divisions. This restructuring reflects the company's ongoing struggles to adapt to a rapidly changing market environment.
Moreover, sales of Samsung’s premium foldable smartphones have not met expectations, further straining the company's profitability. Increased competition from Chinese rivals, particularly Huawei, has exacerbated these challenges. Analysts estimate that Samsung's mobile phone and network divisions will report an operating profit of 2.6 trillion won for the third quarter, down by one-fifth compared to the previous year.
Samsung Electronics' stock performance has also raised alarms, as shares have declined by 23% this year, significantly underperforming SK Hynix, which has seen a 23% increase in its share value. This stark contrast in performance highlights the urgent need for Samsung to adapt its strategies and regain investor confidence.
As the South Korean giant prepares to release its preliminary third-quarter earnings on Tuesday, all eyes will be on its full financial disclosures later this month. The company faces a critical juncture, needing to balance immediate financial results with a sustainable long-term strategy in an increasingly competitive semiconductor market. Samsung's ability to navigate these challenges will be vital not just for its shareholders but also for its future role in the global technology landscape.
(Source:www.tbsnews.net)
According to an analysis by LSEG SmartEstimate, Samsung's operating profit for the quarter ending September 30 is expected to reach 10.33 trillion won ($7.67 billion), significantly up from just 2.43 trillion won during the same period last year. However, this figure represents a slight decrease from the 10.44 trillion won reported in the previous quarter, indicating that while profits are climbing, the pace of recovery is not as robust as anticipated.
The global semiconductor market has started to recover from a downturn experienced last year, largely propelled by the demand for chips utilized in AI servers. However, analysts caution that the rebound for traditional chips used in smartphones and personal computers is slowing. This is particularly concerning for Samsung, which has been in a race with smaller competitors like SK Hynix and Micron to deliver high-end AI chips, especially to major clients like Nvidia.
Samsung's chip division, which is vital to its overall business, is projected to post an operating profit of 5.5 trillion won. This marks a recovery from losses experienced last year but reflects a 15% decline from the previous quarter. Factors contributing to this downturn include Samsung’s decision to allocate funds for employee bonuses, further straining its profit margins. Analysts have noted that Samsung's delayed entry into the high-margin AI chip market, coupled with its greater reliance on traditional mobile chips and exposure to the Chinese market, has made it vulnerable to geopolitical risks and inconsistent demand.
Daniel Kim, an analyst at Macquarie Equity Research, expressed concerns regarding Samsung’s competitive position in the dynamic random access memory (DRAM) sector. He noted, "Samsung is more likely to lose the title of number 1 DRAM vendor in case of a softer commodity DRAM market." This statement highlights the potential consequences of a supply glut in the conventional DRAM market, which could disproportionately impact Samsung compared to its rivals.
This cautious outlook for Samsung comes in stark contrast to Micron, which recently forecasted first-quarter results that exceeded Wall Street expectations. Micron also reported its highest quarterly revenue in over ten years, driven by soaring demand for memory chips in the AI industry, underscoring the growing competitive pressures on Samsung.
Additionally, analysts project that Samsung's non-memory chip operations—encompassing chip design and contract manufacturing—will continue to operate at a loss in the third quarter. The company has struggled to gain traction in this space, facing fierce competition from industry leader TSMC, which serves high-profile clients like Apple and Nvidia.
As Samsung navigates these challenges, it has also initiated significant staff reductions, reportedly cutting up to 30% of its overseas workforce in specific divisions. This restructuring reflects the company's ongoing struggles to adapt to a rapidly changing market environment.
Moreover, sales of Samsung’s premium foldable smartphones have not met expectations, further straining the company's profitability. Increased competition from Chinese rivals, particularly Huawei, has exacerbated these challenges. Analysts estimate that Samsung's mobile phone and network divisions will report an operating profit of 2.6 trillion won for the third quarter, down by one-fifth compared to the previous year.
Samsung Electronics' stock performance has also raised alarms, as shares have declined by 23% this year, significantly underperforming SK Hynix, which has seen a 23% increase in its share value. This stark contrast in performance highlights the urgent need for Samsung to adapt its strategies and regain investor confidence.
As the South Korean giant prepares to release its preliminary third-quarter earnings on Tuesday, all eyes will be on its full financial disclosures later this month. The company faces a critical juncture, needing to balance immediate financial results with a sustainable long-term strategy in an increasingly competitive semiconductor market. Samsung's ability to navigate these challenges will be vital not just for its shareholders but also for its future role in the global technology landscape.
(Source:www.tbsnews.net)