Samsung Electronics expects profit growth to continue to slow in the fourth quarter as it struggles with delays in supplying Nvidia’s AI chips.
Business results weaken sharply in the second half of 2024
Samsung, the world’s largest maker of smartphones and TVs, is expected to see its operating profit rise to 8.2 trillion won ($5.6 billion) in the fourth quarter of 2024, up from a low base of 2.8 trillion won in 2023 but down from 9.18 trillion won in the third quarter of 2024.
Most analysts have cut their earnings estimates for Samsung in recent weeks, with some even expecting operating profit to fall below 8 trillion won.
Previously, in October 2024, this leading Korean company issued a rare apology for disappointing third-quarter 2024 business results and said it was making progress in supplying AI chips to Nvidia.
However, Samsung has yet to provide any updates since then, and delays in delivering high-end chips to Nvidia have continued to impact the company’s earnings.
“SK Hynix and Micron will continue to pose a major challenge to Samsung in the memory space in both the AI segment and the smartphone market through their strong partnerships with industry leaders such as Qualcomm, Intel and Nvidia,” Neil Shah, vice president of research at Counterpoint Research, said in an email to CNBC.
Samsung’s crosstown rival SK Hynix, a major supplier of advanced AI memory chips to Nvidia, is expected to post record earnings in the fourth quarter.
In November 2024, Samsung replaced several senior executives in its chip division, appointing the chip division chief as co-CEO and giving him direct control over the struggling memory chip business.
Shares in Samsung – South Korea’s most valuable stock – fell 32% last year, lagging the broader market which lost 10%.
Great pressure from the global market
Weak demand for traditional chips used in mobile phones and computers, coupled with increased output from Chinese rivals, has put pressure on global chip prices, analysts say.
US chipmaker Micron Technology forecast lower quarterly revenue and profit than Wall Street estimates in late 2024, sending its shares sharply lower due to weak demand for its consumer-facing products, which has hurt rival Samsung’s business.
Prices for DDR4 DRAM chips used in personal computers fell as much as 13% in the fourth quarter and are expected to fall another 15% in the first quarter of 2025, according to estimates from research firm TrendForce.
This offsets the positive impact of a weaker domestic currency, which boosts repatriated earnings from abroad, economists say. In fact, the South Korean won fell to its weakest level in 15 years in December 2024 after President Yoon Suk-yeol’s martial law decree sparked political unrest and U.S. President-elect Donald Trump backed higher import tariffs.
Samsung’s business, meanwhile, makes logic chips designed by customers like Qualcomm, and analysts say that’s expected to continue to lose money, eroding the company’s chip earnings.
Samsung will announce its fourth-quarter revenue and operating profit estimates on January 8, with plans to release detailed results including a breakdown of each business’ earnings by the end of January 2025.
Samsung is always developing new technology to keep up with global technology trends. For example, the company is currently developing a new type of battery with high capacity but without making the phone thicker.
Samsung recently said it has found a way to increase the silicon content in batteries without the problem of swelling. However, there is no information about the release date of this new battery.
Notably, Samsung continues to expect demand for AI server semiconductors including HBM, server DRAM, SSD or solid-state drives to be the main growth driver.