Semiconductor revival driven by AI investments and HBM demand halves foundry losses, marking first 10 trillion+ profit in four years

Samsung Electronics has successfully rebounded in performance, recovering an operating profit of over 10 trillion won in the third quarter of this year for the first time in over four years. This turnaround is attributed to the revitalization of its semiconductor business, a core division, driven by the global surge in artificial intelligence (AI) investments. Even the "pain point" foundry, semiconductor foundry business, which had recorded losses of over 2 trillion won for three consecutive quarters, narrowed its deficit by more than half, contributing to the rebound.

Samsung Electronics announced on the 13th that its preliminary results for the third quarter of this year showed sales of 86 trillion won and an operating profit of 12.1 trillion won. Compared to the same period last year, sales and operating profit increased by 8.7% and 31.8%, respectively. This result exceeded the securities industry's repeatedly raised profit forecasts (10.1 trillion won) by nearly 2 trillion won, marking an "earnings surprise." While concerns had grown after the second-quarter operating profit fell to the 4 trillion won range, the company has now broken the cycle of underperformance.

◇ Semiconductors and Mobile Drive Performance... Consumer Electronics Lag

The star of this surprise performance was semiconductors. Although Samsung Electronics did not disclose segment-specific results in its preliminary report, the securities industry estimates that the DS (Device Solutions) division, responsible for semiconductors, recorded an operating profit of approximately 7 trillion won in the third quarter. Increased shipments of high-value products such as HBM (High Bandwidth Memory) and DDR5, driven by the expansion of AI servers, and rising prices for general-purpose DRAM and NAND flash -- due to supply shortages as production capacity shifted to advanced processes -- contributed to the growth. The NAND business, which had been in the red throughout the first half of the year, turned profitable in the third quarter, while DRAM operating profit is estimated to have doubled compared to the previous quarter.

Notably, the HBM business, which had lagged behind competitors like SK Hynix, showed clear signs of recovery. Orders surged from U.S. big tech companies, including AMD, a rival to NVIDIA, as well as Broadcom, Amazon, and Google, which are developing their own AI chips. Additionally, the company effectively completed quality certification for its 5th-generation HBM (HBM3E) 12-layer product for NVIDIA in the third quarter, enabling visible supply progress. Analyst Chae Min-sook of Korea Investment & Securities noted, "Third-quarter HBM sales increased by 98% compared to the previous quarter, driving average selling price (ASP) growth alongside general-purpose DRAM."

The foundry and System LSI divisions also reduced their operating losses from 2.5 trillion won in the second quarter to the 1 trillion won range in the third quarter. Chae explained, "The foundry business is gradually increasing utilization rates by securing new customers in mature processes above 7 nanometers, and one-time costs incurred since the second half of last year have decreased, significantly narrowing losses." Recent successes, such as securing orders for IBM's next-generation server chips and Nintendo's next-generation console chips, also contributed to improved performance.

The smartphone (MX) business is estimated to have maintained a stable profit in the mid-3 trillion won range. Strong sales of foldable smartphones, including the Galaxy Z Fold7 and Flip7, released in July, drove this performance. The display (SDC) division is also expected to have recorded profits in the 1 trillion won range, supported by increased OLED (organic light-emitting diode) panel shipments for the Galaxy Fold series. In contrast, the TV and consumer electronics business appears to have continued its sluggish performance, with profits limited to the 400 billion won range. IBK Securities predicted, "The profitability of the TV business has declined, and the consumer electronics business may have posted an operating loss."

◇ Fourth Quarter Outlook 'Sunny'... 2025 Expected to Post Largest Earnings in 8 Years

The outlook remains positive. The securities industry forecasts that Samsung Electronics' operating profit will exceed 12 trillion won in the fourth quarter. Analysts expect memory semiconductor prices, including general-purpose DRAM and NAND flash, to rise more sharply than in the third quarter, while foundry segment losses are projected to further decrease. Kim Dong-won, a KB Securities analyst, stated, "Samsung's HBM shipments in the second half of this year are expected to surge by more than double compared to the first half. With limited supply of general-purpose DRAM and NAND, the price uptrend for both is likely to continue for the time being due to growing server demand."

Projections for next year are even more optimistic, with expectations of record-high earnings. The securities industry anticipates Samsung Electronics to achieve its best performance in eight years since the semiconductor "super cycle" in 2018. KB Securities expects the company's operating profit next year to increase by approximately 70% compared to this year, surpassing 54 trillion won. Korea Investment & Securities offered a higher estimate of 73 trillion won. Kim added, "Samsung is expected to supply a significant portion of HBM4 to AMD, which will supply AI accelerators to OpenAI starting in the second half of next year. AMD-related HBM sales are projected to increase at least fivefold compared to this year, and the company is also expected to benefit from NVIDIA's diversification of HBM4 suppliers." The analysis suggests that the AI boom will explosively increase HBM demand, leading to prolonged supply shortages and price increases for general-purpose memory semiconductors, allowing Samsung to ride a "memory super cycle" until 2027.

Breaking: Samsung Electronics Posts 12.1 Trillion Won Operating Profit Surge on AI Semiconductors