Samsung Shares Rise as On-Quarter Improvements Spark Recovery Hopes — Update

By Kwanwoo Jun

South Korean tech giant Samsung Electronics reported sequential improvements in third-quarter sales and operating profit, sending shares higher on hopes that the worst of a severe chip industry downturn may be over.

The world's largest maker of memory chips, smartphones and televisions said Wednesday in a preliminary earnings forecast that its operating profit for the latest quarter came in at 2.4 trillion won ($1.79 billion). That's down from KRW10.852 trillion a year ago but roughly triple the amounts booked in each of the first and second quarters this year.

Samsung also said it expects to book revenue KRW67 trillion in the third quarter--down 13% from a year earlier but up from the first two quarters of 2023.

Shares gained 2.7%, outperforming the local index as investors welcomed both the sequential rises and analysts' suggestions that chip prices appear to have bottomed out.

The rally partly reflects growing market consensus that prices of dynamic random access memory chips have begun bouncing back, said Jung Min-gyu, an analyst with Seoul-based Sangsangin Investment & Securities. Samsung started cutting down on memory-chip production in late April, and output reductions usually start to take effect one to two quarters later, Jung said.

He added that the positive impact of "the DRAM spot-price rebound starting at the end of the third quarter is expected to spread from the fourth quarter."

Samsung has been reeling from a global tech-industry downturn that has weighed on its all-important semiconductor segment, which booked losses in the first and second quarters.

The company cut semiconductor output to reduce inventory and support prices for memory chips, while also trying to meet brisk demand for powerful computing chips among artificial-intelligence companies.

Daishin Securities analysts Kangho Park and Wi Min-bok said in a recent research note that Samsung remains on course for accelerating earnings growth on rising chip prices, with operating profit likely to top KRW3.4 trillion for the final quarter of the year.

Samsung is due to report full third-quarter earnings later this month.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

October 11, 2023 04:44 ET (08:44 GMT)

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