Samsung's Q3 Earnings Take a Hit, Company Bets on AI and Premium Products for Turnaround

Samsung Electronics Co, Ltd SSNLF reported a third-quarter sales decline of KRW67.40 trillion ($51.3 billion), down from KRW76.78 trillion a year ago.

Profit of the Nvidia Corp NVDA supplier KRW5.50 trillion ($4.2 billion), down from KRW9.14 trillion a year ago. A significant chunk of the profit, KRW1.9 trillion, came from a one-time income tax gain.

Samsung’s chip division reported a KRW3.75 trillion operating loss, down from KRW5.12 trillion profit YoY, courtesy of AI demand.

The company’s display division, which makes mobile screens for Apple Inc’s AAPL iPhone 15, clocked an operating profit of KRW1.94 trillion versus KRW1.08 trillion Y/Y.

Samsung’s division, including its mobile business, posted an operating profit of KRW3.73 trillion, aided by new Galaxy Z foldable smartphones, Bloomberg reports.

Samsung looks to increase the sales portion of highly profitable product lines in Q4, including automotive, while working on expanding mass production and sales of HBM3, given the strong demand for generative AI and launches of new products by its major customers. Samsung is focusing on the relatively pricier HBM as a new revenue stream as it continues losing money in its memory chip businesses.

In Q3, demand for mid & low-priced smartphones remained sluggish due to influences of the economic downturn and inflation. 

In the case of the foundry business, earnings remained slow due to stagnant line utilization due to a delayed recovery market conditions for significant applications like Mobile.

For mobile SoC, Samsung is in the final developmental stages to respond to next year’s flagship smartphones and looks to expand its portfolio during Q4.

Regarding the GAA process, 2nd generation 3-nano GAA yields continue to improve, and for the 2-nano process, Samsung looks to establish a design infrastructure incorporating Si results during Q4.

The smartphone market will likely grow Q/Q due to seasonality. Samsung will continue with solid sales of foldable and the S23 series via various sales promotions in the year-end holiday season and expand sales of tablets and wearables, focusing on new premium lineups.

The Networks business will seek to obtain additional wins in overseas markets.

Samsung looks to prune capital expenditures for the semiconductor division to KRW47.5 trillion in 2023, down from KRW47.9 trillion in 2022.