Samsung Expects 78% Drop in Operating Profit, but Remains Optimistic for the Future

Samsung Electronics, the South Korean chip giant, has released guidance indicating a significant decline in its operating profit for the quarter ended September. The company expects its revenue to reach approximately 67 trillion South Korean won ($50.02 billion) in the third quarter, with operating profit standing at around 2.4 trillion won. This represents a substantial drop from the previous year’s figures of 76.78 trillion won in sales and 10.85 trillion won in operating profit.

Despite the disappointing figures, Samsung’s third-quarter guidance does show a positive development when compared to the preceding quarter. The projected revenue of 67 trillion won reflects an 11.5% increase from the second-quarter figure of 60.01 trillion won, with operating profit more than tripling from 670 billion won. While these numbers surpassed analysts’ expectations, they still point to a year-on-year decline of 78.7% in operating profit. Forecasts from LSEG, formerly known as Refinitiv, had predicted a fall of 11.6% in revenue to 67.8 trillion won.

Samsung’s position as the world’s largest memory chip manufacturer, used in various electronic devices such as laptops and servers, and its status as the leading smartphone player, highlight the diversity of its product portfolio. This diversified approach has aided the company in weathering economic uncertainties and maintaining a strong market presence.

Despite the current challenges faced by Samsung, there is optimism for the future. SK Kim, executive director of Daiwa Securities, expects a “price recovery” for Samsung in the second quarter of 2024. Kim explains that Samsung is actively reducing production to address the weak demand environment and create a positive turnaround. Additionally, the recent announcement regarding the shipment of U.S. semiconductor manufacturing equipment to Samsung and SK Hynix’s China factories without separate U.S. approvals is seen as a positive development. This allows the companies to upgrade their capacity in the medium term, potentially until 2025.

On the back of this news, Samsung’s stock experienced a surge of 3.16% on Wednesday. It became the top gainer on the South Korean Kospi, contributing to overall gains in the Asian market. This positive stock performance reflects investors’ confidence in the company’s ability to rebound and adapt to changing market dynamics.

While Samsung expects a considerable drop in operating profit for the third quarter of this year, the company remains optimistic about the future. With its diverse product portfolio and strategies to address current challenges, Samsung is well-positioned to recover and capitalize on future opportunities. As the world’s largest memory chip manufacturer and a dominant player in the smartphone market, Samsung continues to innovate and adapt to changing market conditions. Investors and industry analysts will be closely monitoring its performance in the coming years, especially with the expected price recovery and potential capacity upgrades.

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