Samsung posts 78 per cent profit fall, better than previous quarter, in sign of chip market recovery

South Korea’s largest company has been struggling with an industry downturn alongside smaller rivals SK Hynix and Micron Technology. Mainstay customers, including makers of personal computers and smartphones, have been cutting orders to deal with weak demand for gadgets and excess inventory of chips.

“The result was better than expected,” said Lee Seung-Woo, an analyst at Eugene Investment & Securities. “The bottom for the memory chip industry is behind us and Samsung’s results showed that.”

The two South Korean chip makers are locked in a race to develop tools needed to train AI, with Samsung now playing catch-up to Hynix, the sole supplier of next-generation DRAM to AI chip maker Nvidia. Samsung has said it plans to double its capacity to make high-bandwidth memory, which has the capacity needed to speed up AI training, by 2024.

Hynix’s shares have gained almost 60 per cent this calendar year before Wednesday’s trading, compared with Samsung’s 20 per cent rise.

Until that demand kicks in, Samsung and Hynix have said they will weather economic uncertainty by cutting output of NAND chips used in PCs and phones. That has helped support prices of both DRAM and NAND, in a sign that the market may at long last be bottoming out.

The company, a bellwether for the tech industry because of its leading position in chips, electronics and smartphones, has also benefited from robust sales of its foldable phones.

The company will report a more comprehensive snapshot of its earnings later this month. Samsung previously said that it expected a recovery in sales in the second half of the year.

Investors are looking to the tech industry’s largest companies for hints on when orders for AI chips will translate into sales, but climbing inflation and geopolitical turbulence are clouding forecasts.

Samsung is a stalwart of a memory sector that built capacity rapidly to meet pandemic-fuelled demand. The company spent well into the downturn, saddling itself and its biggest customers with bulging inventories.