Sluggish chip sales curtail Samsung’s profits, worrying investors

Samsung Electronics Co. Ltd.’s third-quarter revenue jumped by 73% from a yr earlier, however though that quantity sounds good, it wasn’t practically sufficient to fulfill traders.

That’s as a result of the tempo of acceleration was considerably decrease than it was simply three months in the past, growing traders’ issues that the corporate is struggling to money in on the bogus intelligence chip growth. The world’s largest producer of reminiscence chips, TVs and smartphones additionally warned that its earnings progress within the present quarter will probably be “restricted,” because it expects rising chip gross sales to be offset by weaker gross sales of TVs, smartphones and residential home equipment.

The corporate reported an working revenue of 9.2 trillion received ($6.66 billion) within the quarter, up from a revenue of simply 2.4 trillion received one yr earlier, however down from the ten.4 trillion received it delivered within the second quarter.

Samsung’s revenue got here in barely forward of its earlier estimate of 9.1 trillion received, which was flagged three weeks in the past and got here in just under the analyst goal. The small bump in profitability implies that Samsung’s earnings have been consistent with expectations, however that didn’t have a lot affect on its share worth, which remained flat in early buying and selling in South Korea at present.

Earlier this month, Samsung issued a uncommon apology to traders over its disappointing numbers, saying that delayed gross sales of superior chips to an unidentified buyer had damage its outcomes. It additionally stated it’s seeing elevated competitors from Chinese language rivals for legacy chips.

The AI trade is at present the one actual vibrant spot within the semiconductor trade, with gross sales of conventional chips for private computer systems, smartphones and servers being sluggish all yr. However Samsung has been unable to capitalize on the AI pattern, as Nvidia Corp. buys a lot of the reminiscence chips for its high-end graphics processing models from different suppliers.

Though Samsung’s reminiscence chip enterprise delivered an working revenue of three.9 trillion received within the quarter, up from a lack of 3.8 trillion received a yr earlier, it was nowhere close to the 6.45 trillion received revenue it recorded within the prior quarter.

Samsung acknowledged that the image is unlikely to alter anytime quickly. “The demand tendencies skilled within the earlier quarter are anticipated to proceed,” a spokesperson stated, discussing the near-term outlook for the semiconductor market.

Along with the sluggish demand, Samsung’s chip earnings have been damage by forex results ensuing from the weak greenback, and one-off bills involving the supply of incentives for workers.

Worse, it’s not simply Samsung’s reminiscence chip enterprise that’s struggling. Its foundry enterprise, which manufactures logic chips for different chipmakers, was hit by widening losses within the quarter.

The lackluster efficiency of the chip enterprise has reportedly persuaded Samsung to postpone the supply of high-end chipmaking gear from the Dutch firm ASML Holding NV.

Reuters stated Samsung had been planning to put in ASML’s equipment at its new factory in Texas, however as a result of it has not but landed any important orders from prospects, it has now determined to place that plan on the again burner.

Sadly for Samsung, its cellular gadgets enterprise didn’t present traders with a lot to cheer about both, with its working revenue falling to only 2.8 trillion received within the quarter, down from 3.3 trillion received a yr earlier.

Samsung’s inventory is down round 25% within the yr thus far, which contrasts poorly with rival chipmakers similar to SK Hynix Inc. and Micron Know-how Inc., which have gained 30% and 20%, respectively. In the meantime, shares of Taiwan Semiconductor Manufacturing Co., its largest rival within the chip sector, have risen greater than 70% this yr.

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