Samsung Electronics is expected to report a nearly nine-fold increase in third-quarter operating profit, although slowing memory chip price growth and a stronger won could put pressure on margins.
The world’s largest memory chipmaker is forecast to post operating profit of 106.1 trillion won (US$79.1 billion) for the July-September quarter, up from 12.17 trillion won a year earlier and marking its fourth consecutive quarter of record operating profit.
The LSEG SmartEstimate, based on forecasts from 21 analysts and weighted towards those with stronger track records, has been cut 7.7% since the end of August.
Samsung’s preliminary third-quarter results are due on Thursday, with detailed results expected later this month.
The expected surge comes after more than a year of strong AI-driven demand that has tightened the global memory chip market. The shortage is expected to persist into next year and potentially through 2028, according to chipmakers.
However, the pace of memory price increases slowed during the third quarter, raising concerns that chip margins may have peaked and prompting questions over how long the current AI spending boom can continue.
TrendForce expects conventional DRAM contract prices to rise 10% to 15% in the fourth quarter from the previous quarter, well below the roughly 60% increase recorded in the second quarter.
“Although the market remains in a tight supply position, the pace of price growth is expected to decelerate,” said Avril Wu, TrendForce’s senior vice president for research.
Suppliers are also becoming more cautious about further sharp price increases that could weaken demand for consumer electronics, while long-term supply agreements are limiting how much prices can rise.
“In addition, long-term agreements represent an increasingly higher proportion of suppliers’ total output. With ceiling-price mechanisms built in, the rate of price increases has slowed down,” Wu said.
Samsung said in July that it aimed to secure long-term contracts covering about two-thirds of its memory output as chipmakers seek greater protection from the industry’s boom-and-bust cycles.
Samsung’s memory-chip operating profit margin is expected to reach 76% in the third quarter, unchanged from the previous quarter, according to SK Securities analyst Han Dong-hee.
The company is also dealing with a stronger won, which gained 14.3% against the dollar during the third quarter for its biggest quarterly rise since early 1998. A stronger domestic currency reduces the value of overseas earnings when converted back into won.
Competition from Chinese chipmakers is another challenge. While Chinese suppliers remain focused largely on lower-end products, they are gaining traction as the AI-driven memory shortage keeps supplies tight.
“Our industry checks indicate that an increasing number of OEMs and ODMs are adopting Chinese DRAM and NAND,” Kinngai Chan, senior research analyst at Summit Insights Group, said in a report.
Higher memory prices have also raised costs for smartphones and consumer electronics, potentially weighing on demand. US chipmaker Micron has warned that the market could be tighter in 2027 and 2028 than this year, although its gross margin is expected to ease to 86.3% in the current quarter from 87%.
Samsung has meanwhile been making progress in high-bandwidth memory (HBM), a key component used in AI data centres.
The company previously lagged SK Hynix after delays in qualifying its HBM products for Nvidia, but has increased shipments of its latest HBM4 chips this year.
J.P. Morgan expects Samsung’s HBM market share to rise to 34% this year from 20% last year, while SK Hynix’s share is forecast to decline to 46% from 60%.
Samsung shares have fallen about 25% from their June record but remain more than twice their level at the start of the year.
Reuters
