Samsung Electronics posted 7 trillion won in operating profit in its core semiconductor business in the third quarter (July–September), achieving a rebound in earnings. The surge in demand for high-value memory such as HBM (high bandwidth memory) driven by the AI investment boom, along with soaring prices for commodity memory amid supply shortages, fueled the gains. The foundry (contract chip manufacturing) business, which had struggled with losses in the 2 trillion won range for three consecutive quarters, also cut its deficit by more than half, helping improve overall results.
Samsung Electronics disclosed on the 30th that, on a consolidation basis, third-quarter operating profit was 12.17 trillion won, up 32.5% from a year earlier on a preliminary basis. The operating profit beat brokerage estimates (10.2 trillion won) by about 20%. It is the first time in about three years, since the second quarter of 2022, that Samsung Electronics' quarterly operating profit has surpassed 12 trillion won. Operating profit had fallen to the 4 trillion won range in the second quarter, heightening a sense of crisis, but the company succeeded in reversing momentum on AI-driven demand.
Revenue rose 8.8% from a year earlier to a record 86.1 trillion won. This is the first time Samsung Electronics' quarterly revenue has exceeded the 80 trillion won range. The previous record for quarterly revenue was 79.1 trillion won in the third quarter of last year. Net profit increased 21% to 12.25 trillion won.
◇ Both memory and nonmemory post improved earnings
By segment in the third quarter, the Device Solutions (DS) division, which handles the semiconductor business, reported revenue of 33.1 trillion won and operating profit of 7 trillion won. Buoyed by strong performance in Samsung Electronics' cash-cow memory business, DS revenue rose 19% from the previous quarter. Memory achieved a record quarterly revenue on expanded sales of HBM3E (fifth-generation HBM) and strong demand for DDR and server SSDs, while operating profit improved sharply as product prices rose and one-off inventory-related expense from the previous quarter declined. The securities market estimates the memory business generated around 7.4 trillion won in profit.
In particular, the recovery in the HBM business, which had trailed rivals such as SK hynix, is clear. Led by U.S. big tech corporations such as AMD, a challenger to Nvidia, and Broadcom, which makes its own AI chips, HBM3E shipments in the third quarter are estimated to have more than doubled from the previous quarter. Samsung Electronics said, "HBM3E is in mass production and sold to all customers, and for HBM4 we have shipped samples to every customer that requested them." It also made official that it began supplying HBM3E to Nvidia starting in the fourth quarter.
The foundry business achieved a record quarterly order intake centered on advanced nodes, and reduced losses as one-off expense decreased and line utilization improved. The securities market analyzes that the foundry division's operating loss shrank from 2.58 trillion won in the second quarter to about 700 billion won in the third quarter. Lee Jong-uk, senior research fellow at Samsung Securities, said, "With increased production of the in-house mobile application processor (AP) Exynos, foundry utilization exceeded 80% during the third quarter." For System LSI, it stably supplied system-on-chips (SoCs) for premium lineups of key customers, but overall results were flat due to industrywide inventory adjustments and seasonal demand slowdown.
◇ Smartphone profits solid; home appliances swing to loss
The Device eXperience (DX) division posted revenue of 48.4 trillion won and operating profit of 3.5 trillion won. Thanks to the launch effect of new foldable models and steady flagship smartphone sales, revenue grew 11% from the previous quarter.
Mobile eXperience (MX), which oversees the smartphone business, saw both revenue and operating profit grow from the previous quarter and a year earlier on strong sales of foldable smartphones such as the Galaxy Z Fold 7 and Flip 7 released in July. Profitability also stayed in the double digits as the revenue share of flagship products expanded and sales of new tablets and wearables increased.
The TV and home appliance business swung to an operating loss of 100 billion won, extending its weak performance. In TVs, premium product sales were steady, but results fell from the previous quarter due to stagnant market demand and intensified competition. In home appliances, operating profit declined from the previous quarter due to seasonal off-peak conditions and the impact of U.S. tariff.
Display (SDC) recorded revenue of 8.1 trillion won and operating profit of 1.2 trillion won. For small and midsize panels, sales expanded on steady demand for flagship smartphones and response to new product launches, improving results. For large panels, sales volume rose from the previous quarter on increased demand for quantum-dot (QD) organic light-emitting diode (OLED) gaming monitors.
Samsung Electronics' third-quarter research and development spending reached a record 26.9 trillion won on a cumulative basis for the first three quarters. This year's full-year facility investment is expected at 47.4 trillion won, of which semiconductors account for 40.9 trillion won and displays about 3.3 trillion won.
◇ In the fourth quarter, it is also "the time of semiconductors"... profit to rise further
In the fourth quarter, memory prices are expected to rise more than anticipated due to supply shortages, steepening the improvement in semiconductor profits. The foundry business is also widely expected to further narrow losses as utilization rises. As of the previous day, Samsung Electronics' fourth-quarter securities market consensus (average forecast) stood at 84.98 trillion won in revenue and 12.7 trillion won in operating profit. Earnings expectations have been revised upward since the release of the third-quarter preliminary results.
Kim Dong-Won, head of research at KB Securities, said, "Cloud (CSP) operators, fearing a DRAM shortage next year, are rapidly increasing advance orders starting in the fourth quarter," adding, "The average selling price of DRAM in the fourth quarter is expected to rise at least 10%–15% more than previously forecast, so Samsung Electronics' results are likely to significantly beat the consensus." The securities market also projects that next year DDR5 margins will surpass HBM3E due to price increases driven by a surge in demand for commodity DRAM. Big tech players such as Nvidia, OpenAI, AMD and Broadcom are diversifying HBM supply chains, which is expected to increase Samsung Electronics' supply volume. Work to certify sixth-generation HBM4 supply with Nvidia is also said to be proceeding smoothly.
Accordingly, Samsung Electronics plans for the DS division to focus on high-value AI memory products, while the DX division will also boost sales centered on AI products to improve profitability.
For memory, DRAM will focus on mass production by expanding HBM sales and differentiating HBM4 performance. It also plans to increase the share of high-value products for AI such as DDR5, LPDDR5X and GDDR7. For NAND, it will strengthen sales of high-value products such as server SSDs based on advanced processes and high-capacity QLC (quadruple-level cell).
In foundry, it will focus on mass production of cutting-edge 2-nanometer (1 nanometer is one-billionth of a meter) products and HBM4 base dies, and intends to begin full-scale operation of the Taylor, U.S., fab starting next year. For System LSI, it plans to push for adoption in flagship models of key customers by strengthening Exynos competitiveness, and for image sensors, it aims to expand market share with differentiated technologies such as 200-megapixel resolution.