• Revenue: Increased by 7% sequentially to KRW79.1 trillion.
• Gross Profit: Slight increase to KRW30 trillion.
• Gross Margin: Decreased to 37.9%, down 2 percentage points sequentially.
• SG&A Expenses: Increased by KRW1.5 trillion to KRW20.8 trillion.
• Operating Profit: Declined by KRW1.3 trillion to KRW9.2 trillion.
• Operating Margin: Decreased by 2.5 percentage points to 11.6%.
• CapEx: Increased by KRW0.3 trillion sequentially to KRW12.4 trillion.
• Quarterly Dividend: KRW361 per share, total payout of KRW2.45 trillion.
• MX Business Revenue Growth: 13% growth due to new smartphone models.
• DS Revenue Growth: 3% increase driven by high-end memory products.
• Display Revenue Growth: 5% increase due to new product launches by major customers.
• Memory Sales Growth: Over 70% for HBM, mid-teens for server DDR5, mid-30s for server SSD.
• Smartphone Shipments: 58 million units with ASP of $295.
• Tablet Shipments: 7 million units.

• Warning! GuruFocus has detected 6 Warning Signs with XBUL:SSUN.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Samsung Electronics Co Ltd (XBUL:SSUN) reported a 7% sequential increase in company-wide revenue, reaching KRW79.1 trillion, driven by strong performance in the MX business and new smartphone launches.
• The company achieved significant sales growth in high-value memory products, with HBM sales increasing by over 70% and server SSD sales by mid-30s, indicating strong demand in the AI and server markets.
• Samsung Electronics Co Ltd (XBUL:SSUN) maintained its position as the highest-ranked non-US company in Interbrand's top 100 Best Global Brands, with a brand value increase of 10% to $100.8 billion.
• The company is focusing on expanding its AI strategy across its product lines, enhancing connectivity and user experience, and driving growth in premium segments.
• Samsung Electronics Co Ltd (XBUL:SSUN) plans to leverage its advanced technologies, such as the 2 nanometer GAA process, to increase competitiveness and secure major customer demand in the foundry market.

Negative Points

• Operating profit declined by KRW1.3 trillion quarter on quarter to KRW9.2 trillion, impacted by one-off costs and currency effects, with operating margin decreasing to 11.6%.
• Gross margin fell by 2 percentage points sequentially to 37.9%, due to inventory valuation reversals and aging inventory depletion.
• The Korean won's strength against the US dollar negatively impacted operating profit by approximately KRW0.5 trillion, affecting component businesses.
• SG&A expenses increased by KRW1.5 trillion to KRW20.8 trillion, with R&D expenses reaching a new high, impacting overall profitability.
• The company faces rising competition in the display market, leading to a conservative outlook for performance improvements despite demand growth in IT and automotive sectors.

Q & A Highlights

Q: What is your outlook in terms of bit growth for DRAM and NAND in the fourth quarter, and how do you plan to innovate your foldable lineup for 2025? A: For DRAM, we expect limited production growth for DDR5 and LPDDR5X due to inventory adjustments by Chinese mobile clients. DRAM bit growth is expected to decline to mid-single-digits in Q4. For NAND, server SSD revenue is expected to increase by 10% Q-on-Q, but overall NAND bit shipment growth will be limited to low-single-digits. Regarding foldables, we aim to offer a differentiated experience by making the Fold slimmer and lighter and enhancing the Flip's design. We are also considering ways to ease purchase barriers for foldable devices.

Q: Can you explain the memory business results in terms of both sales and profit for the third quarter? A: In Q3, we focused on high value-added products and expanded sales of aging inventory. DRAM and NAND ASPs saw high single-digit growth, with total memory revenue posting mid-single-digit growth Q-on-Q. HBM sales grew by over 70% Q-on-Q. However, operating profit declined due to lower inventory valuation loss reversals, one-off costs, and a weaker USD.

Q: What is the status and plan for HBM, specifically HBM3E? A: In Q3, HBM sales grew by over 70% Q-on-Q, with HBM3E accounting for a low- to mid-10% of total HBM sales. Despite some commercialization delays, we expect HBM3E to account for about 50% of HBM sales in Q4. We are preparing enhanced HBM3E products for key customers, with mass production planned for the first half of next year. HBM4 development is on track for mass production in the second half of 2025.

Q: Could you elaborate on your memory outlook for 2025 and CapEx plans? A: In 2025, we expect constrained supply growth due to conversion to advanced nodes and limited clean room availability. Demand will be robust for AI-related HBM, server DRAM, and server SSD, while mobile demand may recover post-inventory adjustments. CapEx will focus on advanced node conversion rather than capacity expansion, with investments in HBM packaging and clean rooms to strengthen competitiveness.

Q: What are your CapEx plans for foundry, and how do you plan to address competition in the mid- to low-end VD market? A: Foundry CapEx will focus on maximizing existing infrastructure utilization and R&D for cutting-edge processes. For VD, we will strengthen premium segment leadership and expand entry-level line-ups, focusing on cost efficiency and manufacturing competitiveness. We will also emphasize SmartThings security and ESG to deliver unique customer experiences.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.