Samsung Q3 earnings disappoint on weak chip business

Samsung Electronics Co., the world’s top memory chipmaker, missed third-quarter earnings estimates on the weak semiconductor business and its outlook remains bearish, especially with the US' plans for new bans on chip technology exports to China.

Samsung on Friday posted a preliminary operating profit of 10.8 trillion won ($7.6 billion) in the July-September period, down 31.7% from a year earlier, although its sales grew 2.7% to 76 trillion won on-year. Compared to the previous quarter, both the profit and revenue slumped by 23.4% and 1.6%, respectively.

The South Korean tech giant had been forecast to log an operating profit of 11.9 trillion won for the quarter and sales of 78.3 trillion won.

The quarterly earnings were known to have resulted from the sluggish memory chip business, while the sector was expected to stay bearish until the first half of next year, industry sources said. Its display business was supported by the launch of Apple Inc.’s iPhone 14, while sales of wearable devices and new foldable models such as the Galaxy Z Fold 4 improved, according to those sources.

FRESH US BANS ON CHIP EXPORTS TO CHINA

Samsung had been expected to generate sales of some 26.7 trillion won from the semiconductor business in the third quarter, 1.1% higher than a year earlier.

Industry sources said the sector’s sales may have fallen short of the forecast as prices of chips for PCs and smartphones tumbled and sales of products for servers missed earlier expectations of strong demand.

“Server demand had been predicted to be relatively healthy, but orders significantly fell on server inventory adjustments,” said an industry source.

Uncertainties over Samsung’s chip business are likely to heighten as Washington is set to announce new restrictions on China’s access to US semiconductor technology this week.

The Biden administration plans to spare Samsung and South Korea’s SK Hynix Inc. from the brunt of new restrictions on memory chipmakers in China aimed at thwarting Beijing's technological ambitions and blocking its military advances, Reuters reported on Thursday.

The US Commerce Department will likely deny requests by US suppliers to send equipment to Chinese firms if they are making advanced DRAM or flash memory chips, according to Reuters.

However, license requests to sell equipment to foreign companies making advanced memory chips in China will be reviewed on a case-by-case basis, Reuters quoted sources as saying, potentially allowing for them to receive the equipment.

Despite the plan, South Korean memory chipmakers are still concerned that the case-by-case review standard is far from an explicit green light for US equipment to be shipped to their Chinese facilities and could result in bickering with regulators over what shipments to approve, according to the report.

Write to Jeong-Soo Hwang at hjs@hankyung.com
Jongwoo Cheon edited this article.