Proactive Investors - Plummeting memory chip demand could see quarterly profits from Samsung Electronics (LON:0593xq) fall by as much as 80% year on year, according to industry analysts.
London Stock Exchange Group (LON:LSEG) estimates shared by Reuters suggest that third-quarter operating profit for the South Korean tech giant likely fell to 2.1 trillion won (£1.27 billion) between July and September as a global memory chip glut took hold.
Samsung is one of the few major players in the flash memory chip manufacturing sector, alongside South Korean rival SK Hynix and US firm Micron (NASDAQ:MU).
Unlike AI-optimised semiconductors designed by Nvidia and manufactured by the Taiwan Semiconductor Manufacturing Company, Samsung-made memory chips are typically found in mainstream personal computers.
While AI continues to drive profits for these competitors, the demand for PCs has fallen dramatically.
Data released by the International Data Corporation this week showed that global PC shipments in the third quarter of 2023 declined 7.6% year on year.
Though this is an improvement from previous quarters, “downward pressure on pricing persists and will likely remain an issue within the consumer and business sectors”, read the report.
"The PC industry is on a slow path to recovery as a device refresh cycle and end of support for Windows 10 will help drive sales in the second half of 2024 and beyond. In the meantime, the PC industry will unfortunately experience more pain," said Jitesh Ubrani, research manager for IDC's Mobility and Consumer Device Trackers.
Samsung’s Device Solutions division, which houses the memory ship segment, posted a 4.3 trillion won operating loss in the previous quarter, but that was offset by profits across the smartphone, audio and display panel revenue streams.
However, global smartphone sales are also at their lowest level in a decade, leading analysts to tamper their expectations of Samsung’s third-quarter earnings due this Wednesday.