Samsung Electronics Shines Again in Q3 with 'Ban·Di·Phone'... Brief Pause Expected in Q4

Achieved Record Quarterly Sales in 3Q
Thanks to Strong Semiconductor, Display, and Smartphone Markets
Operating Profit Estimated Over 10 Trillion Won in Semiconductor Alone
Balanced 'Price, Demand, and Cost' Factors
4Q DRAM Prices Turn Downward... Expected Rebound After 2Q Next Year

[Asia Economy Reporter Su-yeon Woo] Samsung Electronics was able to achieve its highest-ever quarterly sales in the third quarter this year, thanks to the strong performance of its semiconductor, display (DS), and IT & Mobile (IM) businesses. The semiconductor sector led the strong results, supported by a combination of rising semiconductor prices, steady demand, and cost reductions. However, from the fourth quarter onward, memory semiconductor prices are expected to decline, leading to a consensus that Samsung Electronics' performance will likely take a breather.

◆ Semiconductor with the ‘three harmonies’ of price, demand, and cost = According to Samsung Electronics' preliminary third-quarter earnings announced on the 8th, the semiconductor division is estimated to have posted operating profits exceeding 10 trillion won. This figure approaches the division's all-time high operating profit (13.65 trillion won during the supercycle in Q3 2018). The industry environment greatly improved due to favorable conditions in price, demand, and costs.

At the end of the third quarter, the fixed transaction price of DRAM (based on DDR4 8Gb) was $4.10, up 7.8% from the previous quarter, and in the foundry (semiconductor contract manufacturing) sector, prices were raised for the first time since entering the business. Recently, TSMC, the market leader in foundry, notified its clients of price increases of up to 20%, and the industry believes Samsung Electronics also raised prices by at least 10-15%.

While semiconductor prices rose, demand remained solid. Mobile DRAM entered its peak season, and server DRAM demand stayed robust. The foundry sector continued to experience supply shortages. Samsung also benefited significantly from cost reductions due to improved production yields. Yield improvements in the 5nm process were rapidly achieved in foundry, and in the memory sector, increasing the share of 15nm DRAM and 128-layer NAND flash enhanced cost competitiveness.

Not only semiconductors but also the display and smartphone businesses supported the earnings. Although there were concerns about parts supply disruptions, smartphone shipments increased quarter-on-quarter, and the launch of new Z lineup products contributed positively. In the display sector, shipments of small- and medium-sized OLEDs centered on premium products increased, and performance improved compared to the previous quarter. The continued weak won exchange rate also supported profit improvement in the third quarter.

Samsung Electronics announced on the 8th that it recorded third-quarter sales of 73 trillion won and an operating profit of 15.7 trillion won. This is the first time quarterly sales have exceeded 70 trillion won. Employees are seen coming and going at Samsung Electronics' Seocho building on the same day. Photo by Mun Ho-nam munonam@

◆ Concerns over Q4 DRAM price decline, earnings to ‘take a breather’ = Although record quarterly sales were achieved through semiconductor leadership up to the third quarter, the outlook for the fourth quarter appears challenging. Industry experts expect memory semiconductor prices to decline in Q4, which is anticipated to slow Samsung Electronics' earnings growth. Market research firm TrendForce forecasts that DRAM prices will rise 3-8% quarter-on-quarter in Q3 but fall 3-8% in Q4.

This is because the ‘COVID pent-up effect’ that drove PC DRAM demand since last year is gradually fading, making it difficult to see the explosive growth seen recently. As global vaccination expands, demand increases from remote work and online education are expected to weaken gradually. TrendForce estimates that laptop shipments will decrease toward the end of this year, with next year's shipments projected to decline by 7-8% to 222 million units compared to this year.

DRAM prices are expected to remain weak through Q4 this year and Q1 next year but are forecasted to rebound in the second half of next year. Even if PC DRAM demand slows, demand for mobile and server DRAM, which account for over 75% of the total DRAM market, is expected to remain solid.

Ki-woom Securities analyst Park Yu-ak said, "While inventory reduction of PC DRAM may negatively impact the short-term market, it is not enough to affect the overall market trend next year. The recovery of server and mobile DRAM demand and supply reduction due to DDR5 mass production will lead to a market recovery from mid-Q2 next year."

Shinhan Financial Investment analyst Choi Do-yeon also stated, "Unless supply chain disruptions caused by COVID-19 overshadow the opportunity for increased IT demand, the risk of a structural decline in the memory semiconductor market is low. Considering the recent easing of COVID-19 spread in Southeast Asia and the slowdown in the decline of DRAM spot prices, the memory market is expected to recover from Q2 next year."

This content was produced with the assistance of AI translation services.