Seoul (GNP): Samsung Electronics is expected to report a nearly nine-fold jump in third-quarter operating profit, driven by strong demand for artificial intelligence (AI). Analysts, however, have trimmed their forecasts by nearly 8% since the end of August.
The world’s largest memory-chip maker is projected to post an operating profit of 106.1 trillion won ($79.1 billion) for the July-September quarter. That compares with 12.17 trillion won a year earlier. The LSEG SmartEstimate, drawn from 21 analysts and weighted towards those with stronger track records, has been cut by 7.7% over the period.
If the forecast holds, it will be Samsung’s fourth consecutive quarter of record operating profit. It also underlines a prolonged memory shortage, as demand for AI infrastructure outstrips supply growth. Chipmakers expect the shortage, which began more than a year ago, to last into next year and possibly through 2028.
Even so, the pace of price rises slowed in the third quarter. That has fuelled concern that chip margins may have peaked and raised questions about how long the AI spending boom can last.
Market researcher TrendForce expects conventional dynamic random access memory (DRAM) contract prices to rise 10% to 15% in the fourth quarter from the previous quarter. That is well below the surge of roughly 60% in the second quarter. TrendForce’s senior vice president for research, Avril Wu, said suppliers are wary of further steep increases that could hurt demand across consumer electronics.
Higher chip prices have already pushed up the cost of smartphones and consumer electronics, weighing on demand. Long-term supply deals add to the moderation, because they cap price gains in exchange for guaranteed supply. Samsung said in July that it aimed to cover about two-thirds of its memory output with such contracts, joining rivals that want less exposure to the industry’s boom-and-bust cycles.
US rival Micron said the chip market could be tighter in 2027 and 2028 than this year. It still expects its gross margin to slip to 86.3% in the current quarter from 87%, partly because of employee compensation costs.
For Samsung, SK Securities analyst Han Dong-hee estimates the memory-chip operating profit margin at 76% in the third quarter, flat with the previous quarter.
Competition and currency add pressure. Chinese chipmakers remain concentrated in lower-end products but are benefiting from the shortage. Kinngai Chan, senior research analyst at Summit Insights Group, said industry checks show a growing number of equipment makers adopting Chinese DRAM and NAND memory chips.
The South Korean won, meanwhile, strengthened 14.3% against the dollar in the third quarter, its biggest quarterly gain since early 1998, after a sharp rebound from 17-year lows. A stronger won reduces the value of overseas earnings when they are brought home. Samsung shares have fallen about 25% from a June record, though they remain more than double their level at the start of the year.
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One area is moving in Samsung’s favour. The company is expected to raise sales of high-bandwidth memory (HBM) chips, a critical component for AI data centres, narrowing the gap with market leader SK Hynix. Samsung had lagged after delays in qualifying products for Nvidia, but it has gained ground this year by expanding shipments of its latest HBM4 chips. J.P. Morgan estimates Samsung’s HBM market share will rise to 34% this year from 20% last year, while SK Hynix falls to 46% from 60%.
Investors will get a first look on Thursday, when Samsung provides preliminary third-quarter results. Detailed data follows in late October. The slowdown in memory prices will be watched closely, with Wu saying, “The pace of price growth is expected to decelerate.”
