Samsung Electronics warned its third-quarter revenue would are available in under market expectations and apologised for the disappointing efficiency with the tech big lagging its rivals in supplying high-end chips to Nvidia within the booming AI market.
The uncommon apology illustrates the challenges going through the corporate, which has been the world’s largest reminiscence chipmaker for 3 a long time however is battling rising competitors in each typical and superior chips.
Samsung mentioned its AI chip enterprise with an unidentified main buyer was hit by a delay, whereas Chinese language chip rivals elevated provides of typical chips, contributing to the decline in its semiconductor earnings.
The world’s largest reminiscence chip, smartphone and TV maker estimated an working revenue of KRW 9.1 trillion ($6.78 billion or 56,631 crore) for the three months ended September 30, versus a KRW 10.3 trillion (roughly Rs. 64,086) LSEG SmartEstimate.
That will evaluate with KRW 2.43 trillion (roughly Rs. 15,117 crore) in the identical interval a yr earlier and KRW 10.44 trillion (roughly Rs. 64,948 crore) within the previous quarter.
“The earnings are a shock in comparison with what many analysts anticipated initially,” mentioned Lee Min-hee, an analyst at BNK Funding & Securities.
“I do not see its earnings bettering within the present quarter,” he mentioned, saying it lags SK Hynix in rising gross sales of excessive bandwidth reminiscence (HBM) chips to Nvidia and its excessive publicity to the Chinese language market hurts.
Samsung’s late response to the AI chip market will increase its reliance on conventional, lower-margin chips, making it extra susceptible to competitors from China and slowing demand for smartphones and PCs, analysts say.
Excessive-margin chips utilized in AI servers are driving a restoration within the chip market after a post-pandemic downturn final yr. Nonetheless, Samsung has lagged SK Hynix in supplying high-bandwidth reminiscence (HBM) chips to AI chief Nvidia.
“We’ve got brought on issues about our technological competitiveness, with some speaking concerning the disaster going through Samsung,” Younger Hyun Jun, Vice Chairman, Machine Options Division, Samsung Electronics, mentioned.
“These are testing occasions,” he mentioned, pledging to show the problem into a possibility and give attention to enhancing long-term technological competitiveness.
Samsung’s share value, already down greater than 20 p.c thus far this yr, fell 1.3 p.c, underperforming a 0.4 p.c fall within the benchmark KOSPI.
HBM Chips Delayed
Samsung mentioned in an announcement the beginning of gross sales of its high-end HBM3E chips to a serious buyer has been “delayed relative to our expectations”. It didn’t elaborate on the difficulty.
Samsung mentioned in July it will begin mass-producing the chips through the July to September interval.
Earnings declined within the firm’s reminiscence chip enterprise as Chinese language rivals elevated provides of “legacy” merchandise and a few cell clients adjusted inventories, offsetting stable demand for HBM and different chips utilized in servers, Samsung added.
Samsung’s contract chip manufacturing enterprise, which designs and produces custom-made chips for different corporations, doubtless continued to lose cash within the third quarter as it’s struggling to compete with chief TSMC, which counts Apple and Nvidia amongst its clients, analysts mentioned.
Samsung’s chief Jay Y. Lee advised Reuters on Monday that he’s not all for spinning off the contract chip manufacturing enterprise in addition to its logic chip designing operation.
Samsung mentioned one-off prices corresponding to provisions for “incentives” and the unfavourable native forex additionally contributed to the chip earnings decline.
Earnings in its cell division improved from the previous quarter on stable gross sales of its flagship smartphones, whereas earnings at its show unit grew as its clients, which embody Apple, launched new fashions.
Samsung will announce detailed earnings outcomes on October 31.
In Might, Samsung abruptly changed the chief of its semiconductor division, handing the reins to Jun in a bid to beat a “chip disaster”.
Samsung can also be chopping as a lot as 30 p.c of abroad workers at some divisions, Reuters reported in September, underscoring the challenges it faces.
Its US rival Micron final month forecast first-quarter earnings forward of Wall Road estimates and reported its highest quarterly income in over a decade on the again of booming demand for its reminiscence chips utilized in AI.
© Thomson Reuters 2024
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