Samsung Electronics Feels Sting of Memory-Chip Decline, as Net Profit Falls 24%

Samsung’s net profit for the July-to-September quarter came to 9.39 trillion won, or the equivalent of around $6.7 billion. Revenue for the three-month period grew by 3.8% from a year ago to 76.78 trillion won.

Photos: There Aren’t Enough Chips—Why Are They So Hard to Make?

The semiconductor industry, which enjoyed a boom during the pandemic, is now reckoning with an abrupt drop-off in demand. Memory chips, Samsung’s cash-cow business, have gone into an oversupply, triggering price falls. The South Korean company also faces new U.S. restrictions on exports of chip-making equipment to China that are expected to affect operations of the firm’s China-based facilities. 

Samsung is the largest producer of the two major types of memory called DRAM, which enables device multitasking, and NAND flash that provides storage. Average contract prices for both DRAM and NAND flash have fallen by double-digit percentages in the third quarter and are expected to continue declining on a quarterly basis in the coming months, according to forecasts from Taiwan-based TrendForce. 

Samsung’s semiconductor business led by memory saw its operating profit for the July-to-September quarter drop by 49% from the prior year to 5.12 trillion won, the company reported. Revenue for the period declined 12.8% from last year to 23.02 trillion won. 

A day earlier,

SK Hynix Inc.,

No. 2 in global memory revenue, reported a 67% decline in net profit for the July-to-September period and said it would cut its investment in 2023 by more than 50% compared with this year.

Samsung also hinted that it wouldn’t pursue immediate reductions in its capital-expenditure spending. “We’re not considering any artificial reduction in production for the sake of short-term, supply-demand rebalance,” Han Jin-man, executive vice president of Samsung’s memory business, said in an earnings call.

Mr. Han said that while the current market is contracting, it “sees a need to prepare for a demand recovery for the mid- to long-term perspective.”

The South Korean tech giant projects memory demand to remain sluggish into the first half of next year, due to macroeconomic uncertainties and inventory adjustments by customers. But demand may recover in the second half, owing to stronger server demand driven by active data-center installations.

Samsung’s mobile-and-networks division logged third-quarter operating profit of 3.24 trillion won, a 3.6% drop from the prior year. The South Korean tech giant’s TV and digital-appliances business saw its operating profit for the third quarter drop by 67% from the prior year to 250 billion won.

The smartphone market will likely face the continued headwinds of inflation and heightened production costs into 2023, but is likely to achieve slight growth compared with this year, said Kim Sung-koo, vice president of Samsung’s mobile business.

Write to Jiyoung Sohn at [email protected]