Samsung Electronics announced on Wednesday that its preliminary third-quarter profit fell by a smaller-than-expected 78%. This drop comes as the troubled memory chip market is displaying early signs of recovery after a severe downturn. Samsung’s shares opened 3.3% higher compared to a 1.4% rise in the broader market. Analysts suggest that memory chip prices have likely hit their lowest point in the third quarter, with some types beginning to rebound.

All About the Samsung’s Q3 Profit And Chip Market

The world’s largest memory chip and smartphone manufacturer estimated that its operating profit for July-September fell to 2.4 trillion won ($1.79 billion) from 10.85 trillion won the previous year, as stated in a brief preliminary earnings report. This profit exceeded the 2.1 trillion won LSEG SmartEstimate, which takes into account forecasts from more consistently accurate analysts.

Analyst Ko Yeongmin from Daol Investment & Securities commented, “It’s better than expected. Although the situation is not great in the chip business, the decline in memory prices is easing, and further drops will be limited.” While significantly lower than the previous year, Samsung’s third-quarter profit was considerably better than the 640 billion won reported in the first quarter, the lowest since 2009, and the 670 billion won from the second quarter.

In the first and second quarters, the company reported losses of 4.58 trillion won and 4.36 trillion won in its chip business, respectively, as memory chip prices plummeted, and inventory values were written down. A global economic slowdown and high-interest rates reduced demand for most consumer goods after a pandemic-induced surge, leading chip manufacturers to curtail production to counter falling prices.

In the third quarter, analysts suggest that losses in Samsung’s memory chip business likely decreased to around 3 trillion won. Samsung prioritized more profitable, high-end chips like DRAM chips used in artificial intelligence while continuing to reduce the production of older legacy chips. Furthermore, the prices of some DRAM chips, used in tech devices, started rebounding towards the end of the last quarter. Prices of NAND Flash chips used in data storage may also begin to recover as early as the current quarter. This signals the winding down of the severe industry downturn that began last year.

Investors are expected to pay close attention to the details of Samsung’s earnings, which will be released on October 31. They are particularly interested in any changes in prices of legacy chips such as NAND Flash or older DRAM chips to form an outlook about the chip industry’s complete recovery. Samsung estimates that its revenue declined by 13% from the same period in the previous year, reaching 67 trillion won.

The company’s mobile business is likely to report an operating profit of around 3 trillion won, similar to the previous year, according to an average of forecasts from five analysts. Samsung managed to boost sales by launching its premium foldable smartphones during the quarter, despite the slow global smartphone market. The third quarter is usually robust for Samsung’s mobile and display businesses, primarily due to the launch of flagship smartphones and rising demand for display panels from clients like Apple ahead of the latest iPhone release.