*

Q3 profit seen at 12.1 trillion won v 10.1 trillion won

LSEG

estimate

*

Samsung sees revenue rising 8.7% to 86 trillion won

*

Chip business performed better than expected, analysts say

(Rewrites paragraph 1, adds share price in paragraph 4, analyst

comments in paragraphs 7-8)

By Heekyong Yang and Hyunjoo Jin

SEOUL, Oct 14 (Reuters) - Samsung Electronics ( SSNLF )

on Tuesday said it expects its biggest quarterly

profit in over three years, as the global race to boost

production of AI chips has tightened supply and driven up prices

of conventional memory chips, the tech giant's mainstay.

Strong demand for conventional memory chips used in

artificial intelligence servers helped offset weaker sales of

advanced AI chips of Samsung, which has been lagging rivals in

the race to supply to Nvidia ( NVDA ), analysts said.

The world's leading memory chipmaker estimated an operating

profit of 12.1 trillion won ($8.5 billion) for the

July-September period, up 32% from a year earlier and well above

a 10.1 trillion won LSEG SmartEstimate. That would mark its best

quarterly profit in 13 quarters.

Samsung shares rose as much as 2.9% after the announcement

to 96,000 won, their highest level since January 2021, notching

up a 79% gain so far this year.

"The third-quarter earnings surprise came from the chip

business," said Ryu Young-ho, a senior analyst at NH Investment

& Securities.

Although progress in supplying advanced high bandwidth

memory (HBM) chips to major clients such as Nvidia ( NVDA ) was

slower than expected, gains in commodity memory, supported by

tight supplies, helped cushion the impact, analysts said.

"Samsung is a big beneficiary of growing demand for

commodity chips," said Sohn In-joon, an analyst at Heungkuk

Securities.

Sohn attributed the earnings beat to stronger-than-expected

prices of commodity DRAM and NAND chips, stemming from demand

for AI data center servers, and lower chip inventory by

chipmakers that gave them bargaining power in pricing.

Analysts said Samsung also benefited from narrower losses at

its foundry unit, which makes logic chips, as utilisation rates

helped ease fixed-cost pressures.

The company said revenue would likely rise 8.7% to a record

high of 86 trillion won from a year earlier, also helped by the

weaker South Korean currency.

Samsung is expected to release detailed results including a

breakdown of earnings for each of its businesses on October 30.

SHORTAGE STOKES CONVENTIONAL CHIP PRICES

Analysts said memory makers' focus on investing in advanced

chips in recent years may have limited the production of

conventional chips, which extended a supply shortage and spurred

price increases for conventional chips.

Prices of some DRAM chips, widely used in servers,

smartphones and PCs, jumped 171.8% in the third quarter from a

year earlier, according to TrendForce data.

Analysts expect the commodity memory supply shortage to

continue into 2026.

Following OpenAI's success with ChatGPT, big tech companies

have established longer-term plans to expand their spending on

AI-related investments, including data centres and servers

capable of handling the growing workloads from AI services.

While recent chip supply deals with major tech companies,

such as Tesla and OpenAI, eased investor concerns about Samsung,

analysts cautioned that uncertainties remain, including

potential U.S. tariffs that could hurt chip demand, an

intensifying trade war between the U.S. and China, as well as

China's tightened export controls on rare earth materials used

in advanced chips and manufacturing equipment.

Samsung has been the world's biggest memory chipmaker for

three decades but it is facing increasing competition in

advanced AI chips after losing its No. 1 DRAM market share to SK

Hynix ( HXSCF ) in the first quarter of this year.

Its rivals, SK Hynix ( HXSCF ) and Micron, have benefited from

robust memory chip demand driven by AI, while Samsung's exposure

to China, where advanced chip sales are restricted by the United

States, has constrained its growth.

Analysts expect Samsung's HBM sales to gradually improve

after the company made meaningful progress in supplying its

latest 12-layer HBM3E chips to Nvidia ( NVDA ) following delays

in recent quarters, though some said shipment volumes remain

limited.

Samsung is betting on next-generation HBM4 products to

narrow the gap with SK Hynix ( HXSCF ). Morgan Stanley said in a report

that Samsung is on track with next-generation HBM4 development,

working closely with major U.S. customers. Commercial shipments

and sales contributions are expected to begin in 2026.

($1 = 1,427.1000 won)