Samsung Electronics is expected to report a nearly ninefold increase in its third-quarter operating profit, driven by surging demand for artificial intelligence technology.
Market expectations indicate that the world's largest memory chip manufacturer will post an operating profit of 106.1 trillion won, or 79.1 billion dollars, for the July to September period.
The projected earnings mark a significant leap from the 12.17 trillion won the company secured during the same period last year. It will be the technology giant's fourth consecutive quarter of record operating profit.
Samsung Electronics operates as the flagship subsidiary of the South Korean conglomerate Samsung Group. Beyond semiconductors, it is one of the world's largest manufacturers of smartphones, televisions, and consumer appliances. However, its semiconductor division is traditionally its most profitable unit and serves as a major bellwether for the global technology economy.
The company dominates the global market for memory chips, which are essential components used in everything from personal computers and mobile devices to enterprise data processing facilities.
Despite the strong overall figures, industry analysts have tempered their expectations in recent weeks. Forecasts have been reduced by almost 8 percent since late August, largely due to a moderation in the price gains of memory chips and the strengthening of the local currency.
Moderating price growth
The LSEG SmartEstimate tool, which weights projections from 21 analysts based on their historical accuracy, registered a 7.7 percent reduction in its earnings forecast since the end of August.
Research firm TrendForce anticipates that contract prices for conventional DRAM will rise between 10 percent and 15 percent in the fourth quarter compared to the third. This represents a significant deceleration from the estimated 60 percent increase recorded in the second quarter.
DRAM, or dynamic random access memory, is a common type of semiconductor memory that provides temporary storage for data that computer processors need to access quickly. The semiconductor industry is historically characterized by volatile boom and bust cycles. During periods of high demand, manufacturers invest billions in new fabrication plants, which can eventually lead to oversupply and crashing prices once operational.
Avril Wu, senior vice president of research at TrendForce, said the pace of price growth was expected to slow down, even though the market remained in a situation of restricted supply.
Memory chip manufacturers assess that the current supply shortage, which began more than a year ago, will persist into next year and potentially continue until 2028.
In an effort to shield itself from the industry's traditional cycles of expansion and recession, Samsung announced in July that it was targeting long-term contracts to cover approximately two-thirds of its memory chip production.
According to estimates from Han Dong-hee, an analyst at SK Securities, Samsung's operating profit margin in its memory chip division is expected to reach 76 percent in the third quarter. This figure would remain stable compared to the previous three-month period.
Currency swings and Chinese competition
The manufacturer is navigating increasing competition from Chinese rivals. These competitors remain focused on lower-end products but have benefited from the broader, artificial intelligence driven memory shortage.
Generative artificial intelligence systems rely on massive language models that require digesting vast amounts of text, images, and data. This intensive processing demands large scale server farms equipped with specialized, high capacity semiconductor components.
Alongside DRAM, NAND flash memory is another primary category of semiconductor. It retains data even without power, making it the standard storage medium for mobile devices, solid state drives, and data center storage arrays.
Kinngai Chan, a senior research analyst at Summit Insights Group, said industry analysis indicated an increasing number of original equipment manufacturers and original design manufacturers were adopting Chinese DRAM and NAND products.
Currency fluctuations have presented another hurdle for Samsung. The South Korean won appreciated 14.3 percent against the United States dollar during the third quarter.
This currency movement marked a sharp recovery from 17-year lows and represented the won's largest quarterly gain since the beginning of 1998.
South Korea maintains a highly export driven economy, making major corporations particularly sensitive to foreign exchange rates. A stronger local currency typically reduces the repatriated value of a company's overseas operations, as foreign earnings convert into fewer won.
Advances in AI memory
The market expects Samsung to report higher sales of high bandwidth memory chips, which are essential components for artificial intelligence data processing centers.
High bandwidth memory, or HBM, is an advanced technology that vertically stacks multiple memory chips. This architecture achieves significantly faster data processing speeds while consuming less power compared to traditional memory designs. These chips are a critical pairing for advanced graphics processing units used to train complex artificial intelligence models.
Samsung previously fell behind in the supply of high bandwidth memory following delays in product certification for the United States chip designer Nvidia.
Nvidia is the dominant global supplier of the specialized graphics processing units required for artificial intelligence computing. Its technical validation is crucial for memory manufacturers seeking to supply components for high end artificial intelligence infrastructure.
The South Korean firm gained ground this year by expanding shipments of its latest HBM4 chips.
Estimates from the financial services firm JPMorgan suggest Samsung's share of the high bandwidth memory market will rise to 34 percent this year, up from 20 percent last year.
Conversely, the market share of its primary domestic rival, SK Hynix, is expected to fall to 46 percent from 60 percent.
SK Hynix operates as the world's second largest memory chipmaker and represents another major South Korean industrial conglomerate. The company had previously secured a strong early lead in supplying Nvidia with earlier generations of high bandwidth memory hardware.
Samsung will release its preliminary third-quarter results on Thursday. The company is scheduled to publish its detailed financial data for the period at the end of October.
