Samsung flags Q3 earnings shock; chip head apologizes for weak results

South Korean tech giant Samsung Electronics Co. flagged a four-fold jump in third-quarter profit on Tuesday, but its earnings came well below market expectations, prompting its chip head to offer a rare apology for weak performance.

The world’s largest memory chipmaker said in a regulatory filing that its July-September operating profit is estimated at 9.1 trillion won ($6.8 billion), up 274.5% from 2.43 trillion won in the year-earlier period on a consolidated basis.

The preliminary operating profit came in below the market consensus forecast of 10.8 trillion won.

Third-quarter sales likely rose 17.2% from the same period a year earlier to 79 trillion won, it said. The estimate is lower than the market consensus of 80.78 trillion won.

Samsung plans to announce detailed quarterly results, including net profit and divisional performance, later this month.

In the second quarter, Samsung posted 10.44 trillion won in operating profit on consolidated sales of 74.1 trillion won.

Samsung’s shares fell as much as 1.8% earlier on Tuesday following the weaker-than-expected results.

The stock pared some earlier losses and traded 1.2% lower at 60,300 won at 10 a.m. in Seoul, underperforming the broader benchmark Kospi index’s 0.7% decline.

UNPRECEDENTED APOLOGY

Soon after its third-quarter earnings announcement, Jun Young-hyun, vice chairman and head of Samsung’s Device Solutions (DS) division, which oversees the semiconductor business, issued an unusual apology for its weak performance.

"I am sorry for not meeting market expectations, causing concerns about our fundamental technological competitiveness and the company's future,” he said in a message to employees, investors and clients.

"The management leading the business is fully responsible, and we will take the lead in overcoming this crisis and making the third quarter’s weak earnings a turning point for the company," he said.

His apology marks the first time Samsung's top leadership has issued a separate statement regarding a performance report.

The apology comes as Samsung faces heightened concerns over declining stock prices and worries about its technological competitiveness.

Jun, who took the post in May, outlined three key strategies to overcome the current crisis: restoring fundamental technological competitiveness, preparing more thoroughly for the future, and innovating organizational culture and work processes.

"Technology and quality are our lifeblood and the pride of Samsung Electronics. We cannot compromise on them," he said. "We will focus on securing fundamental competitiveness rather than short-term fixes."

SCRAMBLING TO CATCH UP TO SK HYNIX

The global semiconductor market has been recovering from last year’s downturn, driven by chips used in AI devices and servers, but demand recovery for conventional chips used in smartphones and PCs is slowing.

The Korean company has been scrambling to catch up with smaller crosstown rival SK Hynix Inc. in a race to supply high-end AI chips such as high-bandwidth memory (HBM) to Nvidia Corp., the world’s top AI chip designer.

While SK Hynix said more than half of its sales revenue comes from HBM and other high-value server DRAMs, Samsung has a relatively higher proportion of smartphone and PC DRAMs.

Samsung’s third-quarter earnings were also weighed down by the delay in supplying the latest HBM chips to Nvidia and 1.5 trillion won in one-off charges related to employee performance bonuses, analysts said.

Write to Jeong-Soo Hwang at hjs@hankyung.com
In-Soo Nam edited this article.