Samsung expects highest quarterly profit in over three years, lifted by AI chip demand

SEOUL (Reuters) -Samsung Electronics on Tuesday projected a 32% rise in third-quarter operating profit from a year earlier, beating analysts' estimates by far, as demand for conventional memory chips helped offset weaker high bandwidth memory chip sales. The world's largest memory chipmaker estimated an operating profit of 12.1 trillion won ($8.5 billion) for the July-September period, which would mark its highest quarterly profit in more than three years, well above a 10.1 trillion won LSEG SmartEstimate. Samsung’s third-quarter results underscored strong demand for server and AI-related chips, which have boosted prices and shipments of conventional DRAM and NAND products. "The third-quarter earnings surprise came from the chip business," said Ryu Young-ho, a senior analyst at NH Investment & Securities. Although progress in supplying advanced high bandwidth memory (HBM) chips to major clients such as Nvidia was slower than expected, gains in commodity memory, also supported by tight supplies, helped cushion the impact, analysts said. "Chip sales were strong overall, driven by higher prices and shipments, with HBM products accounting for a larger share within memory. The foundry unit also narrowed its losses as higher utilization rates helped ease fixed-cost pressures," Ryu said in a note. Revenue would likely rise 8.7% to 86 trillion won from a year earlier, the filing showed. Samsung is expected to release detailed results including a breakdown of earnings for each of its businesses on October 30. Samsung shares have rallied 75% to record highs this year. Analysts said memory makers' focus on investing in advanced chips in recent years may have limited the production of conventional chips, which could extend a supply shortage and drive price increases for the chips needed in servers for AI. Prices of some DRAM chips, widely used in servers, smartphones and PCs, jumped 171.8% in the third quarter from a year earlier, according to TrendForce data. Following OpenAI's success with ChatGPT, big tech companies have established longer-term plans to expand their spending on AI-related investments, including data centres and servers capable of handling the growing workloads from AI services. While recent chip supply deals with major tech companies, such as Tesla and OpenAI, eased investor concerns about Samsung, analysts cautioned that uncertainties remain, including potential U.S. tariffs that could hurt chip demand, an intensifying trade war between the U.S. and China, as well as China's tightened export controls on rare earth materials used in advanced chips and manufacturing equipment. ($1 = 1,427.1000 won) (Reporting by Heekyong Yang, Hyunjoo Jin and Joyce Lee ; Editing by Chris Reese and Sonali Paul)

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