While the artificial intelligence revolution is radically changing the balance of the technology world, one of the most concrete reflections of this transformation is experienced in the memory chip market. The rapidly increasing need in every field, from data centers to cloud computing, from large language models to autonomous systems, has exploded the demand for high-performance memory chips and disrupted the supply-demand balance. Samsung Electronics, which is at the very center of this wave, broke a profit record in the third quarter that no technology company has ever seen before. South Korea's largest technology giant increased its memory sales to record levels, thanks to its continued artificial intelligence infrastructure investments, and became the first technology company to exceed the 100 trillion won mark.
Samsung Electronics announced that it expects operating profit to be at 107.4 trillion won in its preliminary data for the period July 3-September 30. While this figure was slightly above LSEG SmartEstimate's expectation of 106.1 trillion won, it was recorded as the highest quarterly profit record achieved by a technology company. The company announced that it experienced an almost nine-fold increase compared to the same period last year. Third quarter revenue increased by 127 percent compared to the previous year, reaching 195 trillion won. This performance means that Samsung announced record operating profit for the fourth consecutive quarter. The world's largest memory chip manufacturer has made the most of the global memory shortage, which has deepened as artificial intelligence infrastructure investments outpaced supply growth.
Most of the profit growth came from memory chips. Alongside traditional DRAM and NAND chips, demand for high-bandwidth memory (HBM), which is critical for massive data processing capacity in AI applications, has skyrocketed. According to the estimate of Douglas Kim from Douglas Research Advisory, Samsung's HBM bit shipments in the third quarter increased by nearly 50 percent compared to the previous quarter. The company is trying to close the gap with SK Hynix in the HBM market. Samsung and Micron expect the supply-demand imbalance to continue until 2028. But the rise of Chinese competitors and a possible slowdown in AI spending pose risks to the long-term profitability outlook.
Despite announcing record profits, Samsung shares fell 0.2 percent in early trading. The KOSPI index decreased by 0.5 percent. The stock has fallen more than 25 percent since its record high in June, reflecting investors' concerns about the sustainability of the artificial intelligence boom. Analysts also revised their forecasts downward, taking into account that the strength of the South Korean won against the dollar would reduce the value of overseas sales when converted to the local currency. “The market's focus has shifted to whether the sharp profit growth that started a year ago is sustainable,” said Kim Seok-hwan, market analyst at Mirae Asset Securities.
Analysts expect profits to increase 8.2 percent in the fourth quarter compared to the previous quarter. This rate indicates a significant slowdown compared to the 20 percent quarterly growth in the third quarter. Traditional DRAM contract prices are expected to increase 10-15 percent in the fourth quarter, according to TrendForce data. This rate is modest compared to the nearly 60 percent jump seen in the second quarter. This slowdown in memory prices is being watched closely by investors, following the rise that has continued for more than a year and has pushed the profit margins of Samsung, SK Hynix and Micron to record levels.
The memory chip boom is also creating challenges for Samsung's other businesses. The smartphone and consumer electronics divisions in particular are under pressure due to rising component costs. The increase in memory prices negatively affects the profitability of these segments.
Samsung will announce its detailed results according to business lines on October 29.
