Reported by Heekyong Yang
SEOUL (Reuters) -Samsung Electronics is anticipated to achieve its highest third-quarter profits since 2022, spurred by increased memory chip prices due to server demand as clients replenish their inventories, according to analysts’ projections.
The leading global producer of memory chips is expected to announce an operating profit of 10.1 trillion won ($7.11 billion) for the period spanning July to September, as per LSEG SmartEstimate which aggregates insights from 31 analysts, favoring those with a strong track record of accuracy. This marks a 10% rise compared to the previous year.
Analysts have credited the uptick primarily to improved pricing of conventional memory chips, which is likely to counterbalance diminished sales volumes of high-bandwidth memory (HBM) chips, as Samsung has not yet delivered its latest HBM offerings to Nvidia.
HBM chips, essential for artificial intelligence (AI) advancements, are constructed to decrease energy consumption and manage vast datasets by vertically stacking chips.
Demand for memory chips, particularly from hyperscale data centers and investments in AI applications such as ChatGPT, has intensified the workload on general-purpose servers, thereby driving up prices of conventional memory chips.
Data from TrendForce indicates that the prices of certain DRAM chips, commonly used across servers, smartphones, and PCs soared by 171.8% in the third quarter compared to the same time last year.
Even as Samsung’s traditional memory segment thrived, analysts pointed out that delays in delivering its newest 12-layer HBM3E chips to Nvidia have adversely impacted its profits and share performance.
Rivals SK Hynix and Micron have capitalized more effectively on the AI-induced demand, while Samsung’s reliance on the Chinese market, where advanced chip exports face restrictions from the U.S., has limited its growth potential.
Market sentiment regarding Samsung’s shares and its broader chip operations, encompassing both memory and contract manufacturing, is expected to improve as they finalize supply agreements with key customers like OpenAI and Tesla.
Following their chip supply agreement with Tesla in July, Samsung’s shares have surged over 43%.
During OpenAI CEO Sam Altman’s recent visit to South Korea, Samsung, SK Hynix, and OpenAI announced collaborative efforts to provide advanced memory chips for the Stargate initiative.
The AI chip collaboration between OpenAI and AMD, a significant customer for Samsung’s HBM products, is expected to also be advantageous for Samsung, according to Ryu Young-ho, a senior analyst at NH Investment & Securities.
Ryu noted that Samsung’s $16.5 billion foundry contract with Tesla has elevated expectations that its underperforming contract chip manufacturing sector could attract more orders from prominent tech companies if the project is executed effectively.
