Samsung's R1.34 trillion quarter, and the chip squeeze South African phone buyers will feel
The memory chips inside almost every phone sold here are made by three companies, and the AI data-centre boom has pushed their prices up.
Samsung Electronics expects to report operating profit of 107.4 trillion won for the July to September quarter, the company said on Thursday, a rise of 782.5 percent on the same quarter a year earlier.
At prevailing rates that is about R1.34 trillion. It would be the first time a South Korean company has passed 100 trillion won in quarterly operating profit.
The same statement put revenue at 195 trillion won, up 127 percent. Both figures are company estimates. Samsung publishes its final quarterly results at the end of October.
The reason is memory. Samsung is the world’s largest maker of memory chips, the components that hold data inside phones, laptops and servers. Advanced versions of those chips are being bought in volume for the data centres that train and run artificial intelligence systems, and the demand has pushed prices up.
That is good news for anyone holding Samsung shares. It is less good news for anyone holding a Samsung phone, and by extension for anyone in South Africa buying a mid-range handset this year.
Where the squeeze reaches South Africa
The chips at issue are DRAM and NAND flash. They are the working memory and the storage in almost every smartphone sold in this country, from the flagship Galaxy S series down to the R3 000 devices that most South Africans actually buy.
Samsung’s own mobile division buys those chips from Samsung’s chip division, and it now pays more for the same components than it did a year ago. Analysts quoted in the coverage say rising production costs have become harder to absorb, and that the company is trying to limit price increases in order to hold on to shipment volumes and market share.
That tension is the part a South African reader will notice. A manufacturer that is trying to protect market share has an incentive to swallow some of the input cost rather than pass all of it on. A manufacturer under margin pressure does not. Which way Samsung leans in the entry and mid tiers is the number that matters here, and it will show up in the recommended retail prices on local shelves over the next two quarters.
South Africa is a price-sensitive market. The bulk of handsets sold here sit well below the flagship tier, and a few hundred rand on a device is the difference between a sale and a customer keeping an older phone for another year.
The pressure is not Samsung’s alone. Samsung, its South Korean rival SK hynix and the US company Micron dominate the global market for high-bandwidth memory, the advanced chips used alongside other processors in AI data centres. When three suppliers face a demand surge, the price of the whole memory category moves, and every handset maker pays it.
What Samsung is doing with the money
In August the company announced a buyback of up to $80 billion of its own stock, saying the shareholder return plan was designed to make sure the fruits of the company’s growth translated into tangible benefits for shareholders. At the time of writing that is about R1.4 trillion at prevailing rates.
Workers have been making their own claim on the profits. Samsung avoided a strike in South Korea earlier this year by agreeing to distribute bonuses equal to 10.5 percent of operating profit to its semiconductor employees. Around 78 000 of its 125 000-strong domestic workforce are eligible for a bonus of roughly $370 000 this year, based on a market estimate of profits. That is about R6.5 million per eligible employee.
In Taiwan on Wednesday, union representatives said hundreds of workers at a Micron plant had voted in favour of a strike after talks with the company over bonus reforms collapsed.
Analysts at the South Korean brokerage Shinhan Securities have taken a bullish view. In a note last week they said they expected even stronger earnings next year, and that Samsung now appears all set for a rapid increase in market share as it ramps up production of a new generation of high-bandwidth memory called HBM4. The transition to that generation, the note said, will open the opportunity to renegotiate prices and help guarantee solid margins.
The South African question
None of this is decided in Johannesburg, and no South African regulator has a say in what Samsung charges for a memory chip. What the country does have is a consumer market that is unusually exposed to handset pricing, because so much of how South Africans get online runs through a phone rather than a fixed line.
That makes the memory cycle a cost-of-living story here, not only a semiconductor story. When DRAM and NAND prices rise, the effect arrives on a shelf in a mall, in a contract bundle, or in the price of a repair part, months after the earnings headline.
IOL reported on 8 October that Samsung had forecast the 780 percent profit jump, and the figures above come from that report and the company statement it describes. The account is accurate as far as it goes. What it does not carry is the second half of the sentence for a reader in this country, which is that the shortage lifting those profits is the same shortage lifting the input costs of the phone in your hand.
The Enquirer has put the local pricing question to Samsung’s South African operation and to the Consumer Goods and Services Ombud, and will set out their answers alongside the final results when Samsung publishes them at the end of October.
Source: IOL, Samsung forecasts 780% profit jump as AI boom fuels chip demand.
