Samsung Hit With 56% Slash To Profits Following Memory Weakness

Samsung Electronics posted an operating profit of around 7.8 trillion won and revenues of 62 trillion won for the third quarter this year, the company announced.

It is a sharp 55.7% decline in operating profits from last year's record profit due to a continued downturn in the memory chip market that started late last year. Revenue for the quarter also fell 5.3% compared to last year.

Still, the memory business contributed the lion's share of the company's overall profits with 3.05 trillion won. The company said it expects macroeconomics uncertainties to remain for 2020, but that it would bounce back next year as there is optimism from its data centres and the trend of using higher-density products from 5G.  

Despite the decrease, Samsung's smartphones and mobile OLED screens showed improved performances compared to the second quarter and the corresponding quarter from a year ago.

Samsung's mobile business reported operating profits of 2.9 trillion won, a rise of 31.5% from a year ago, and was the unit's best performance so far this year.

The South Korean tech giant said the growth was backed by strong sales of its Galaxy Note 10 and mid-tier A series devices. Its low to mid-end devices also showed higher profitability thanks to cost reductions, it said, while the Galaxy Fold also demonstrated its "technological leadership".

During the results announcement, Samsung stated its plans to expand its lead in the premium smartphones market by releasing more foldable devices and meeting 5G demand next year.

See also: LG reduces mobile losses for Q3

The display business, meanwhile, posted a surprise 1.17 trillion won in operating profits, an increase of 6.4% from last year. The uptick was backed by improved cost control and a rise in demand for mobile OLEDs from flagship smartphones launches by clients.

At the start of the month, Samsung had announced that it would invest $11 billion into QD display development, which is set to start in the fourth quarter. The development of its mobile displays will focus on slimmer and more power efficient products while for its large-sized displays, Samsung will restructure its display business to focus on QD displays while existing LCD business would offer value-added products such as ultra-large and 8K offerings. 

Samsung plans to push its QLED offerings and super-large TV models next year and expects demand to rise due to the Tokyo Olympics.

Its consumer electronics business also posted operating profits -- 550 billion won -- which was a slight drop from last year's profits of 560 billion won for the corresponding quarter. Samsung attributed the drop to intensifying competition in TVs. 

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