Samsung Electronics has announced progress on a significant supply deal for artificial intelligence-focused chips, seeking to reassure investors after a slowdown in semiconductor profits in the last quarter. The South Korean tech giant reported that its operating profit for the July-September period surged by over 277% from a year earlier to 9.18 trillion won ($6.65 billion). However, this figure marked a 12% decline from the second quarter, primarily due to one-off costs like providing employee incentives in its computer chip business and the impact of a weaker U.S. dollar.
During the quarter, Samsung's semiconductor division recorded an operating profit of 3.86 trillion won ($2.8 billion), bouncing back from a deficit in 2023 but significantly lower than the 6.45 trillion won ($4.67 billion) reported in the April-June period. While the demand for AI and server chips remained strong, the mobile chip business weakened as some customers adjusted inventories. The market was also affected by increased supply of legacy memory products from Chinese manufacturers.
Notably, Samsung faced challenges in the HBM3E segment, falling behind competitors like SK Hynix in the latest generation of high bandwidth memory chips crucial for AI applications. However, during a recent conference call, Samsung's Executive Vice President highlighted a significant advancement in the qualification test process for HBM3E products with a major client, hinting at a potential boost in sales in the fourth quarter. Speculation arose that Samsung might be nearing a supply deal with Nvidia, a leading U.S. chip designer specializing in AI-powered chips.
Looking ahead, Samsung anticipates softness in memory demand for mobile and PC segments in the fourth quarter but expects robust demand in AI. The company plans to focus on driving sales of high-bandwidth memory and high-density products to capitalize on the growth in AI applications.
