Samsung earnings disappoint as SK hynix runs away with the AI race

Home > Business > Industry

Samsung earnings disappoint as SK hynix runs away with the AI race

Published: 31 Oct. 2024, 18:00 Updated: 31 Oct. 2024, 19:06

LEE JAE-LIM
lee.jaelim@joongang.co.kr

Audio report: written by reporters, read by AI

Samsung Electronics' office building in Seocho District, southern Seoul [YONHAP]

Samsung Electronics missed market expectations in the third quarter, despite a posting triple-digit surge in operating profit from the year before, after struggling for months to obtain Nvidia's coveted certification for its latest chips.

The tech giant said its quarterly operating profit had surged 277.37 percent on year, to 9.18 trillion won ($6.65 billion), over the July-September period, which fell short of market tracker FnGuide's 10.8 trillion won estimate. The chipmaker currently lags behind rival SK hynix, which is already supplying the technology to Nvidia, in the high bandwidth memory 3E (HBM3E) race.

The sales of Samsung's cash cow semiconductor business, nevertheless, rose 78 percent on year to 29.27 trillion won while operating profit jumped to 3.86 trillion won from the previous year's operating loss of 3.75 trillion won. Memory chip sales rose 112 percent on year to 22.27 trillion won with demand for high-end products such as high bandwidth memory (HBM), DDR5 and server solid-state drives to fuel AI and server needs on the rise. HBM sales rose 70 percent on quarter, according to the company, which expects HBM3E to take up 50 percent of HBM sales in the fourth quarter.

Samsung said in a statement that the division's expenses, “were higher than the difference between the company’s total operating profit and the market consensus,” which amounts to 1.2 trillion won.

Kim Jae-june, Samsung's executive vice president in charge of the memory business, attempted to quell investor concerns related to its latest memory stacks on the company's earnings call Thursday, stating that the chipmaker has made “significant process” on quality testing and plans to release “improved” HBM3E chips based on the timing of major clients' upcoming GPU releases.

“Although the commercialization of HBM3E chips for major clients has been delayed compared to expectations, we have made significant process by completing critical steps in the quality testing with key clients, which should enable expanded sales in the fourth quarter,” Kim said.

The company is currently at work on HBM4 with plans to begin production in the latter half of next year.

“We are preparing for the commercialization of customized HBM chips with multiple clients,” Kim said. “What’s essential there is the customers’ requirements, so we plan to respond flexibly by selecting foundry partners for base die manufacturing based on their preferences, regardless whether they are internal or external.”

The company's device experience division, which is in charge of its mobile and TV businesses, rose 2 percent to 44.99 trillion won. Its operating profit declined 9.7 percent to 3.37 trillion won.

The mobile experience, in charge of smartphones, inched up 1.7 percent to 30.52 trillion won while its operating profit sank 14.5 percent to 2.82 trillion won. Despite new of smartphones, tablets and wearables boosting profit, an underperforming network unit stalled the division's growth, the company said.

Revenue reached a record-high quarterly figure of 79.1 trillion won, reflecting a 17.35 percent on year surge but missing the market expectation of 80.9 trillion won.

Net profit rose 72.84 percent to 10.2 trillion won, exceeding analysts’ projection of 9.18 trillion won.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]