Analysts predict that Samsung's profits will plunge 80% in the third quarter, while chip losses will continue.

CTOnews.com, Oct. 10 (Xinhua)-- Samsung's third-quarter profit is expected to fall 80% from a year earlier, as the continued impact of a global chip glut led to losses in the South Korean technology giant's cash cow business.

Samsung, the world's largest maker of memory chips, smartphones and televisions, will report preliminary third-quarter earnings on Wednesday.

Samsung's operating profit from July to September could fall to 2.1 trillion won (CTOnews.com Note: currently about 11.403 billion yuan), compared with 10.85 trillion won in the third quarter of last year, according to a SmartEstimate forecast by 19 analysts on the LSE.

This is because Samsung's chip division, traditionally Samsung's biggest profit division, is likely to report a quarterly loss of Won3tn to Won4,000bn after memory chip prices hit rock bottom and did not rebound as quickly as some predicted.

Analysts say Samsung's cut in chip production has also hurt economies of scale and raised chip manufacturing costs.

After announcing production cuts for the first time in April, analysts said Samsung cut production further in the third quarter to reduce inventories and deal with the worst industry recession caused by a chip glut in decades.

Fearing the recession, smartphone and PC makers have been avoiding buying new memory chips, opting instead to run out of existing inventory within months. Analysts say their inventories are low enough that demand is expected to rebound early next year.

Samsung recently received its first order for server memory chips from a North American data center company in a year, raising hopes that data center customers will start buying chips again, KB Securities said in a report late last month.

Strong demand for memory chips used in artificial intelligence such as HBM remains a bright spot, but Samsung lags behind rival SK Hynix in developing such chips and winning over customers such as Nvidia, a leader in artificial intelligence chips.

Samsung's mobile business, which launched high-end collapsible smartphones this quarter, boosted sales despite the downturn in the global smartphone market, according to an average of five analysts who forecast an operating profit of about Won3,000bn.