Samsung's Q3 Profits Expected to Jump 4X on Chip Demand, but AI Chip Lag Raises Concerns

Samsung Electronics is projected to report a four-fold increase in Q3 operating profit due to recovering chip demand. However, the company’s slow move into the booming AI chip market may impact its future growth trajectory.

Q3 2024 Profit Surge Amid Chip Demand Recovery

Analysts estimate Samsung's operating profit at around 10.33 trillion won ($7.67 billion) for Q3, significantly higher than 2.43 trillion won a year earlier. However, this is relatively unchanged from 10.44 trillion won in the previous quarter, indicating a slowing recovery pace. The global semiconductor market has improved, primarily driven by demand for AI server chips, yet demand for traditional chips used in smartphones and PCs is softening.

Lagging in the AI Chip Market & Competitive Pressure

Samsung faces challenges catching up to competitors like SK Hynix and Micron in the high-margin AI chip sector, supplying major players like Nvidia. Additionally, Samsung is competing against growing Chinese semiconductor companies for commodity chip production. Analysts predict the company’s chip division will swing to a profit of 5.5 trillion won year-on-year but will see a 15% drop from the previous quarter, partly due to bonus provisions.

Geopolitical Risks & Market Shifts

Samsung's slower response to the AI chip market and its dependence on traditional mobile chips and China make it susceptible to geopolitical risks. Analyst Daniel Kim of Macquarie Equity Research noted that a potential commodity DRAM supply glut may impact Samsung more severely than its rivals like SK Hynix.

Mobile Business & Share Performance

Sales of Samsung's premium foldable phones have underperformed, contributing to a 2.6 trillion won operating profit in its mobile and network division—a 20% decrease from last year. Meanwhile, Samsung shares have declined by 23% this year, trailing SK Hynix’s 23% gain.

Upcoming Earnings Announcement

Samsung Electronics is set to release its preliminary Q3 results on Tuesday, with full financial details to be reported later in the month.

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