Is Samsung Electronics Semiconductor Division Likely to Return to Profit in Q1 Next Year?

Average Selling Price of DRAM and NAND Rises... DRAM Shipments Increase, HBM Share Expected to Expand
Semiconductor Division Forecasts Operating Loss of Around 1.09 Trillion KRW in Q4 This Year

Although Samsung Electronics' performance is steadily improving, attention is focused on the timing of the semiconductor division's return to profitability amid continued losses. The market expects losses to persist through the fourth quarter, with a turnaround to profit possible in the first quarter of next year. Accordingly, next year's performance is expected to improve significantly compared to this year.

According to financial information provider FnGuide on the 1st, the consensus operating profit for Samsung Electronics in the fourth quarter is 3.4783 trillion KRW, down 19.22% from the same period last year. This is an improvement compared to the third quarter's 2.4336 trillion KRW.

Samsung Electronics announced its confirmed third-quarter results the previous day. The company's third-quarter revenue was 67.4 trillion KRW, down 12.21% year-on-year, and operating profit fell 77.57% to 2.43 trillion KRW. The semiconductor (DS) division continued to incur losses, but the deficit narrowed to the 3 trillion KRW range, allowing the overall operating profit to recover to the trillion-KRW level. The semiconductor division's operating losses were 4.58 trillion KRW in the first quarter, 4.36 trillion KRW in the second quarter, and reduced to 3.75 trillion KRW in the third quarter.

With quarterly results steadily improving, Samsung Electronics' performance appears to have passed its bottom. Kim Rok-ho, a researcher at Hana Securities, said, "Samsung Electronics' quarterly operating profit bottom was 600 billion KRW, and with improvements in operating profit in the second and third quarters compared to the previous quarter, it is clear that the performance bottom has been passed," adding, "The main driver of performance improvement is the bottoming out of the memory semiconductor market and the resulting reduction in losses."

The improvement trend is expected to continue into the fourth quarter. Kim Dong-won, a researcher at KB Securities, said, "Samsung Electronics' fourth-quarter operating profit is expected to increase by 43% from the previous quarter to 3.5 trillion KRW," explaining, "With simultaneous increases in the average selling prices (ASP) of DRAM and NAND, along with increased DRAM shipments and reduced low-price NAND sales, the semiconductor operating loss in the fourth quarter is expected to decrease by 1.8 trillion KRW compared to the previous quarter. Additionally, strong sales of the top-tier iPhone 15 model are expected to generate over 2 trillion KRW in operating profit in the small- and medium-sized organic light-emitting diode (OLED) division."

With the market recovery, a return to profitability in the semiconductor division is also expected in the first quarter of next year. No Geun-chang, a researcher at Hyundai Motor Securities, explained, "In the fourth quarter, with the expansion of DDR5 and high-bandwidth memory (HBM) proportions and price increases for most memory products compared to the previous quarter, the memory semiconductor loss margin is expected to decrease significantly, and the memory semiconductor business is expected to return to profitability in the first quarter of next year."

The recovery of the semiconductor division is expected to be the key to both performance and stock price recovery. Hwang Min-sung, a researcher at Samsung Securities, said, "What matters for semiconductor stock prices is ultimately the cycle," adding, "The inflection point in memory prices was confirmed starting from the third quarter, and the atmosphere for price negotiations in the fourth quarter is also positive. Given the current atmosphere, DRAM and NAND prices in the fourth quarter are expected to rise by 10% compared to the third quarter, and the industry's profitability will improve rapidly."

Samsung Electronics' stock price has fallen more than 8% from its peak in July. Despite the recovery in performance, the stock price has remained sluggish due to external factors. With the market recovery and performance visibility confirmed, the correction is expected to be a buying opportunity. Kim Hyung-tae, a researcher at Shinhan Investment Corp., said, "The current stock price is at a price-to-book ratio (PBR) of 1.2 times based on 2024, which is below the five-year average of 1.5 times," adding, "As the operating environment improves and profitability recovery centered on high-value-added products accelerates, a buying approach is valid." Kim Rok-ho of Hana Securities also explained, "With the performance direction secured, the strategy to increase holdings during the adjustment period has become clearer," adding, "Since the current PBR is below the historical average band, it is a comfortable zone for increasing holdings."

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