Samsung Chip Business Soars: Q3 Operating Profit Jumps 32%; Poised to Retake Memory Industry Crown

TradingKey - Global memory chip leader Samsung Electronics reported preliminary third-quarter results showing a significant rebound in operating profit to 12.1 trillion won (approximately $8.5 billion), marking the highest quarterly profit in over three years and significantly exceeding market expectations of 10.1 trillion won (LSEG SmartEstimate data), driven by a strong recovery in its chip business.

The better-than-expected results pushed Samsung's stock price up 3.1% in early trading on the Seoul market, hitting a record high of 96,000 won, but later retreated to close down 1.82%.

Analysts widely believe that the surge in server demand triggered by the artificial intelligence (AI) wave is the key driver behind Samsung's performance rebound.

"The third-quarter earnings surprise came from the chip business," said Ryu Young-ho, a senior analyst at NH Investment & Securities. He noted that the demand for traditional memory in general servers and the surging demand for high-bandwidth memory (HBM) in AI servers have created a synergistic effect, jointly boosting the overall memory market's prosperity.

“Samsung’s operating profit was much bigger than anyone was expecting,” said Sanjeev Rana, head of research at CLSA Securities Korea. “Its high-bandwidth memory shipments have recovered, rising 70% to 80% from the previous quarter, and there is a possibility that the size of the writedowns in the foundry business was much smaller than expected.”

Since OpenAI's ChatGPT achieved breakthrough success, major tech companies such as Microsoft, Google, and Meta have increased their AI investments, accelerating the construction of data centers and servers capable of handling large-scale AI service workloads, directly boosting demand for memory products such as DRAM and NAND.

A Nomura analyst team led by C.W. Chung stated in a recent report that U.S. tech giants' investments in artificial intelligence (AI) and traditional servers will boost memory chip demand and push profit margins for DRAM and NAND products to record levels by 2026.

MS Hwang, Research Director at Counterpoint, noted that boosted by AI-related investments, the prices and sales volumes of general DRAM and NAND memory have risen simultaneously, and Samsung is likely to have reclaimed the top spot as the world's largest memory manufacturer by revenue.

Samsung has been the world's largest memory chip manufacturer for the past three decades, but it is now facing increasingly fierce competition from SK Hynix, which surpassed Samsung to become the market leader in DRAM market share in the first quarter of this year.

However, MS Hwang also cautioned that Samsung's shipments of the latest HBM3E memory to AI chip giant NVIDIA currently contribute relatively limited impact to overall performance. “To regain its previous market leadership, Samsung needs to carry this momentum into its next-generation product, HBM4,” he said.

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