*

Q3 operating profit of $6.7 bln slightly above preliminary

estimate

*

Forecasts limited earnings growth in Q4

*

Q3 chip division profit falls to 3.9 trln won from 6.5

trln won

in Q2

*

Company this month made rare apology for disappointing

earnings

(Recasts with Samsung outlook on chips, adds analyst comments)

By Hyunjoo Jin and Heekyong Yang

SEOUL, Oct 31 (Reuters) - Samsung Electronics ( SSNLF )

said it would focus on producing high-end chips to

improve profitability after reporting a 40% quarter-on-quarter

plunge in chip profit, in a stark contrast with rivals TSMC and

SK Hynix ( HXSCF ) that posted record earnings on the AI boom.

The world's biggest maker of memory chips, smartphones and

TVs also warned on Thursday of limited earnings growth in the

current quarter due to intensifying competition in the consumer

electronics segment during the peak year-end demand season.

"In the fourth quarter, while memory (chip) demand for

mobile and PC may encounter softness, growth in AI will keep

demand at robust levels," Samsung said in an earnings statement.

"Against this backdrop, the Company will concentrate on

driving sales of High Bandwidth Memory (HBM) and high-density

products," it said, referring to premium memory chips used to

make AI chipsets like those produced by industry leader Nvidia ( NVDA )

.

Samsung posted an operating profit of 9.2 trillion won

($6.66 billion) in the July to September period, compared with

2.4 trillion won a year earlier and 10.4 trillion won the

previous quarter.

The third-quarter result was slightly above Samsung's

preliminary estimate of 9.1 trillion won flagged earlier this

month, which was below market expectations at the time. Shares

fell 0.2% in early trading on Thursday, with the wider South

Korean market down 1.3%.

"Samsung Electronics ( SSNLF ) hasn't commercialised HBM as

effectively as its competitors, so its third-quarter performance

and fourth-quarter outlook are falling short of market

expectations," said Baik Gil-hyun, analyst at Yuanta Securities.

"It's anticipated that it will take some time before the

business performs as expected."

The South Korean company this month made a rare apology for

its disappointing earnings, citing "delays" in sales of its

advanced chips to an unidentified major customer and rising

supply of traditional chips from Chinese rivals.

Artificial intelligence is the only bright spot in the

sluggish chip market, but Samsung has been struggling to supply

high-end semiconductors used in Nvidia's ( NVDA ) AI chipsets, making the

South Korean company more vulnerable to lacklustre demand for

traditional chips used in PCs and smartphones.

CHIP EARNINGS FALL

Samsung's chip division swung to an operating profit of 3.9

trillion won in the third quarter from a loss of 3.8 trillion

won a year earlier, but that was down from 6.45 trillion won the

preceding quarter.

Samsung said its chip earnings were hurt by one-off expenses

such as the provision of employee incentives, and currency

effects due to a weak dollar.

SK Hynix ( HXSCF ) had posted a record third-quarter

operating profit of 7 trillion won and TSMC also had

its best-ever result during that period thanks to AI chip sales

to Nvidia ( NVDA ).

Samsung is struggling to compete against rivals not only in

its mainstay memory chip business, but also in its foundry

business that designs and produces logic chips for other

clients. Analysts say Samsung's logic chip business suffered

from widening losses in the third quarter.

The company has postponed taking deliveries of ASML's

high-end chipmaking equipment for its upcoming factory

in Texas as it has yet to win any major customers for the

project, sources previously told Reuters.

Samsung's mobile devices business also saw its third-quarter

operating profit dropping to 2.8 trillion won from 3.3 trillion

won a year earlier.

($1 = 1,380.3900 won)