Samsung hints at recovery in demand for memory chips, forecasts robust Q3 earnings

Samsung Electronics on Tuesday hinted at a recovery in the memory chip market, as it released its preliminary guidance for third-quarter earnings.

Vice Chairman and CEO Kim Ki-nam said he foresees various signs that a recovery in the memory chip market is around the corner.

“There are various signals related to the market recovery,” the chief of Samsung’s semiconductors division told The Korea Herald as he arrived at Coex in southern Seoul to attend the Korea Electronics Show 2019.

The vice chairman agreed that memory chip prices have fallen steeply, as the company’s third-quarter earnings turned out better than market expectations.

He also didn’t deny that demand for server DRAM chips is rising.

Samsung, meanwhile, announced earlier in the morning that it is forecast to post 62 trillion won ($51.9 billion) in sales with operating profit of 7.7 trillion won in the July-September period.

The estimates for sales and operating profit are down 5.29 percent and 57.3 percent on-year, respectively.

However, despite harsh external conditions such as Japan’s export curbs and global trade tensions, analysts are of the view that Samsung’s major businesses are faring well against the headwinds.

During the third quarter, it is assumed that the smartphone and display units performed well, rather than the semiconductors division, according to market watchers.

The high sales of the Galaxy Note 10 and the popularity of Galaxy Fold are expected to have contributed to restoring the mobile unit’s profitability, they said.

While the semiconductor division is forecast to have earned between 3.3 trillion and 3.6 trillion won, the mobile and display units are expected to have obtained around 3 trillion won combined.

Samsung officials said they expect a better performance in the fourth quarter, but maintained a conservative stance.

“The company has reduced its inventory levels significantly, but it could take a little more time,” an official said.

According to financial analysts, the inventory levels of DRAM at Samsung and SK hynix will be normalized by the second quarter of next year.

Regarding next year’s facility investments and merger and acquisition plans, Kim was cautious.

“The company will observe the market conditions more carefully,” CEO Kim said.

Regarding Samsung’s plan to acquire a fabless company to expand its system-on-chip business this year, Kim said it “is still ongoing and various measures are being considered.”

By Song Su-hyun (song@heraldcorp.com)