Samsung’s semiconductor division, lagging behind rivals in AI chips, reports a 40% drop in profit from the previous quarter
South Korea’s Samsung Electronics said Thursday that its operating profits soared 277% on-year to $6.6 billion, but missed expectations as it struggled to leverage demand for chips used in artificial intelligence servers.
The world’s largest memory chip maker posted an operating profit of 9.18 trillion won ($6.6 billion) “largely due to one-off costs”.
It also warned in a statement that “the strength of the Korean won against the U.S. dollar resulted in a negative impact on company-wide operating profit.”
Although operating profit nearly tripled compared to a year ago, it fell short of market expectations and was down 12% compared to the previous quarter.
Revenue rose 17.35% to 79.1 trillion won ($57.2 billion), its highest quarterly record, Samsung said.
The firm is the flagship subsidiary of South Korean giant Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in Asia’s fourth-largest economy.
Semiconductors are the lifeblood of the global economy, used in everything from kitchen appliances and mobile phones to cars and weapons.
The company’s semiconductor division reported 3.86 trillion won in operating profit, a 40% sharp decrease compared to last quarter.
Samsung said its performance had decreased due to “a reduced reversal of inventory valuation loss compared to the previous quarter, one-off expenses such as the provision of incentives, and currency effects due to a weak dollar”.
Rare apology
Samsung has been lagging behind South Korean giant SK hynix when it comes to high bandwidth memory (HBM) chips used in AI chipsets, which experts have blamed for the lacklustre results.
This month, Samsung management issued a rare, separate apology, acknowledging the company was facing a “crisis”.
“Due to results that fell short of market expectations, concerns have arisen about our fundamental technological competitiveness and the future of the company,” said the statement, which was signed by Jun Young-hyun, the vice chairman of the company’s device solutions division.
“Our management will take the lead in overcoming the crisis…We will make the serious situation we are currently facing an opportunity for a resurgence.”
Samsung shares have dropped sharply 33% since its peak in July and the company has lost over $120 billion of market value during that time.
Shares in Samsung rose 0.3% in Seoul on Thursday in early trading.
The rare apology came about a week after the tech giant said it intended to reduce staff in some of its operations in Asia, describing the move as “routine workforce adjustments”.
Bloomberg reported that the layoffs could affect about 10% of the workforce in those markets.
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