Samsung Electronics’ chip profit shrinks 40% from the previous quarter

Samsung Electronics on Thursday reported third-quarter sales and operating profit slightly above its own expectations, but its chip business posted a sharply lower profit from the previous quarter.

The semiconductor unit reported third-quarter operating profit of 3.86 trillion won (about $2.8 billion), down 40% from the previous quarter.

While its memory chip unit benefited by strong demand for its artificial intelligence and conventional server products, Samsung said “inventory adjustments negatively impacted mobile demand.” The company said it was also contending with “the increasing supply of legacy products in China.”

Samsung is the top manufacturer of memory chips used in devices like laptops and servers, and it ranks as the second-largest player in the smartphone market worldwide.

While artificial intelligence drove demand for advanced nodes from its foundry unit, Samsung said mobile and PC demand underperformed. The Korean tech giant said the rebound in mobile and PC demand will be delayed, though interest in more advanced products will continue to grow, driven by AI investments.

Here are Samsung’s results compared with the guidance it issued earlier this month:

• Revenue: 79.1 trillion won vs. 79 trillion
• Operating profit: 9.18 trillion vs. 9.1 trillion won

Those guidance figures were markedly lower than the LSEG estimate for 11.456 trillion won in operating profit. Samsung Vice Chairman Jun Young-hyun, the new head of the company’s device solutions division, issued a rare apology after the guidance release.

Samsung expects demand for these advanced chipsets to continue to fuel growth next year. The company said it also expects server demand to remain strong as tech companies continue to make “robust investments.”

Shares of Samsung Electronics listed in the South Korean stock exchange have dropped 24.71% so far this year.

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