Samsung Electronics has recently provided an update regarding its significant supply agreement focused on chips designed for artificial intelligence, aiming to reassure investors amidst a slowdown in semiconductor earnings. The South Korean tech leader announced that its operating profit for the third quarter, covering July to September, surged by over 277% compared to the same period last year, totaling 9.18 trillion won (approximately $6.65 billion). Despite this impressive increase, it was a 12% decrease from the previous quarter, with the company attributing this decline mainly to one-time expenses, including employee incentives in its chip division, and the impact of a weaker U.S. dollar.
The semiconductor unit of Samsung reported an operating profit of 3.86 trillion won (around $2.8 billion) for the quarter. This marks a recovery from earlier losses recorded in 2023 but represents a significant drop from the 6.45 trillion won ($4.67 billion) achieved in the April to June quarter. Even though Samsung experienced strong demand for chips geared towards AI and servers recently, its mobile chip sector faced challenges as certain clients adjusted their inventory levels. The overall market was also influenced by an uptick in the supply of older memory products from Chinese manufacturers, according to statements released by the company.
Notably, Samsung has struggled to keep pace with major rivals like SK Hynix in the production of HBM3E, the latest generation of high-bandwidth memory chips utilized in AI applications. During a recent conference call, Executive Vice President Jaejune Kim shared that the company has made significant progress in the qualification testing for its HBM3E products intended for a notable client, an advancement he noted could potentially boost sales in the upcoming fourth quarter. These comments sparked speculation about a potential supply agreement with Nvidia, a leading U.S. chip manufacturer known for its work with advanced AI technologies.
Looking forward to the fourth quarter, Samsung anticipates that while demand for memory chips in mobile and PC markets may remain weak, the growth in the AI sector is expected to sustain robust levels of demand. In light of this, the company plans to focus on enhancing sales of high-bandwidth memory and high-density products to navigate the fluctuating market conditions effectively.