Samsung Electronics, a South Korean tech giant, has issued a warning, predicting a significant drop in its third-quarter profits. The company attributed this decline to a combination of factors, including one-time costs and a surge in supply from Chinese competitors in the memory chip market.
On Tuesday, Samsung announced an estimated operating profit of approximately 9.10 trillion won ($7.6 billion) for the quarter ending in September. This figure represents a 274% increase from the previous year’s 2.43 trillion won. However, the company highlighted that its memory business has been impacted by “one-time costs and negative effects,” which include inventory adjustments by mobile customers and an increase in the supply of legacy products by Chinese memory companies.
These memory chips, crucial components for devices like laptops and servers, are a major focus for Samsung, which holds a leading position in their manufacturing. Samsung is also the world’s second-largest player in the smartphone market. The company further reported that shipments of HBM3E chips to major customers have been delayed. In August, Nvidia Corp. successfully tested and approved Samsung Electronics’ fifth-generation high bandwidth memory chips, known as HBM3E, for use in its artificial intelligence processors. This delay in shipments could further impact the company’s financial performance.
Following the release of this earnings guidance, Samsung’s share price, which has already fallen by more than 24.12% year-to-date, dropped by an additional 0.7%. This indicates investor concern about the company’s future prospects.
The increased competition from Chinese memory companies, coupled with one-time costs and shipment delays, is creating a challenging landscape for Samsung. It remains to be seen how the company will navigate these obstacles and maintain its position in the rapidly evolving tech industry.
