Samsung Profit Surges Nearly Ninefold to $80bn on AI Chip Demand

Emmanuel Addeh in Abuja

Samsung Electronics has projected a nearly ninefold surge in third-quarter operating profit to Won107.4 trillion ($80.2 billion), driven by soaring demand for memory chips used in artificial intelligence infrastructure.

The forecast, which represents a record quarterly profit for the South Korean technology giant, compares with Won12.2 trillion recorded in the same period last year and exceeded the Won106 trillion estimate compiled by LSEG SmartEstimate.

Samsung also estimated third-quarter sales at Won195 trillion, representing a 126.6 per cent increase from a year earlier. The company issues preliminary profit and sales figures before releasing its full quarterly results, the Financial Times reported.

The latest guidance marks the fourth consecutive quarter of record performance for Samsung and underscores the prolonged shortage of memory chips as AI companies compete aggressively for supplies, pushing up prices.

Samsung said the result made it the first technology company to record more than Won100 trillion in quarterly operating profit.

Strong demand for memory chips, a critical component of data centres powering AI applications, has generated record earnings and boosted the share prices of major chipmakers.

Samsung’s stock has more than doubled this year, lifting the company’s market value to about $1.3 trillion, the FT reported. The boom in AI-related demand, however, has created difficulties for other memory-chip buyers, including smartphone and computer manufacturers, which are facing higher input costs.

Contract prices for conventional dynamic random-access memory chips, which provide short-term data storage in electronic devices, are expected to rise by between 10 and 15 per cent in the fourth quarter, according to market researcher TrendForce.

Analysts expect tight supply conditions to continue into next year, with the industry’s margins increasingly supported by long-term supply agreements with AI companies.

In advanced AI hardware, Samsung has also recently made progress in developing next-generation HBM4 chips, narrowing a gap with rival SK Hynix after years of struggling to compete in the high-end market.

Despite the record profit outlook, however, investors remain concerned about the sustainability of the AI-driven chip boom.

Samsung shares fell 2.4 per cent yesterday, even as the company announced the record profit forecast, and remained more than a quarter below their June peak.

“Investors are looking beyond the company’s quarterly figures and waiting for clearer signals that the upcycle can continue next year and the year after next,” Albert Yong, managing partner at Seoul-based Petra Capital Management, told the FT.

The FT also reported that Samsung remains relatively undervalued compared with US chipmakers, with its price-to-earnings ratio at about 12, against nearly 40 for the Philadelphia Semiconductor Index.

Analysts expect Samsung’s full results to show the impact of the sharp appreciation of the South Korean won, which gained more than 14 per cent against the dollar during the third quarter, its biggest quarterly rise since early 1998.

The stronger currency could weigh on earnings because Samsung generates most of its revenue outside South Korea.

Besides, rising memory-chip costs have put further pressure on Samsung’s consumer electronics operations, which have struggled to pass the higher costs on to customers.

Analysts estimate that the company’s smartphone and home-appliance businesses recorded combined operating losses of more than Won1 trillion in the third quarter, the report stated.