Samsung Faces Sharp Decline in Chip Profits as Market Pressures Mount

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Samsung released its Q3 earnings report on Thursday, revealing a mixed performance that reflects ongoing challenges in its semiconductor business. 

The company’s chip-making division reported an operating profit of 3.86 trillion won (approximately $2.8 billion) for the quarter, reflecting a 40% decline from the previous quarter’s figures.

Despite exceeding its own revenue expectations with total sales reaching 79.1 trillion won, Samsung struggled with weak demand in the mobile and PC markets.

Last January, Samsung’s semiconductor division also reported similar losses totaling around

2.18 trillion won ($1.64 billion) in the fourth quarter of 2023.

Why is Samsung’s Profit on the Decline?

The company attributed this decline to inventory adjustments and a growing supply of legacy products in China, which resulted in a slowdown in sales.

While the demand for advanced chips driven by AI and server products provided some cushion for the semiconductor unit, it was not enough to offset the losses.

Samsung noted that the recovery in mobile and PC demand may take longer than anticipated. However, the firm remains optimistic about the potential for high-end products, particularly as investments in AI continue to drive interest.

To change its fortunes, the company said it will focus on ramping up production of advanced memory chips, particularly its HBM3E series, which are critical for AI applications.

The firm has reported meaningful progress in the product, with a major customer, believed to be Nvidia. In August, it was reported that HBM3E passed Nvidia’s tests for use in its AI processors, which commands a significant share of the AI chip market.

If Nvidia adopts Samsung’s chip for AI, Samsung could overcome a major hurdle in its bid to compete with local rival SK Hynix in the race to supply advanced memory chips that power generative AI.