Seoul’s Samsung Electronics, the world’s top memory chip maker, is expected to forecast its profit growth continued to slow in the fourth quarter due to struggles with Nvidia’s strong demand for AI chips.
Samsung, also the world’s largest smartphone and TV maker, is anticipated to estimate its operating profit rose to 8.2 trillion won ($5.6 billion) in the quarter ended December, up from a low base of 2.8 trillion won a year earlier but down from 9.18 trillion won in the preceding quarter.
Analysts Cut Earnings Estimates
A slew of analysts have cut their earnings estimates in recent weeks, with some expecting operating profit to fall below 8 trillion won. This indicates that Samsung’s struggles to meet Nvidia’s demand for AI chips have had a significant impact on its quarterly performance.
Delays in Supplying Nvidia Continue to Weigh on Earnings
In October, the South Korean company made a rare apology for its disappointing third-quarter performance and said it was making progress in supplying AI chips to Nvidia. However, it has not provided any update since, and delays to providing Nvidia with high-end chips have continued to weigh on its earnings, analysts said.
Leadership Changes at Samsung’s Chip Division
In November, Samsung replaced some of its top executives in the chip division, while naming its chip division chief co-CEO and bestowing him direct control of its struggling memory chip business. This leadership shake-up was aimed at revamping the company’s chip operations and improving efficiency.
Samsung’s Stock Performance Lags Behind
Shares of Samsung, South Korea’s most valuable stock, slumped 32% last year, lagging the wider market’s 10% loss. In contrast, its cross-town rival, SK Hynix, a major supplier of advanced AI memory chips to Nvidia, is expected to post record earnings for the fourth quarter, analysts said.
Pressure on Chip Prices
Lacklustre demand for traditional chips used in mobile phones and PCs and rising output from Chinese rivals has put pressure on chip prices, analysts said. U.S. chipmaker Micron Technology last month forecast quarterly revenue and profit below Wall Street estimates, sending shares lower as weak demand for consumer-centric products impacts the Samsung rival’s business.
DRAM Chip Prices Plummet
Prices of DDR4 DRAM chips used in personal computers fell as much as 13% in the fourth quarter and are expected to decline another 15% in the current quarter, according to estimates from researcher TrendForce. This offset the positive impact of the weaker local currency that boosts repatriated earnings from overseas.
The South Korean Won Hits a 15-Year Low
The South Korean won dropped to its weakest level in 15 years in December after President Yoon Suk Yeol’s martial law decree triggered political turmoil and U.S. President-elect Donald Trump advocates higher tariffs on imports. This has had a significant impact on Samsung’s repatriated earnings from overseas.
Samsung’s Logic Chip Business Continues to Make Losses
Samsung’s business of making logic chips designed by customers like Qualcomm is expected to continue to make losses, eroding its chip earnings, analysts said.
Fourth-Quarter Results Expected Soon
Samsung will announce estimates on fourth-quarter revenue and operating profit on Wednesday, with a plan to release detailed results including a breakdown of earnings for each of its businesses in late January. This will provide investors with a clearer picture of the company’s performance and prospects for the future.
Key Statistics:
- Samsung’s operating profit is expected to rise to 8.2 trillion won ($5.6 billion) in the quarter ended December.
- Analysts have cut their earnings estimates in recent weeks, with some expecting operating profit to fall below 8 trillion won.
- Delays in supplying Nvidia with high-end chips have continued to weigh on Samsung’s earnings.
- Shares of Samsung slumped 32% last year, lagging the wider market’s 10% loss.
- SK Hynix is expected to post record earnings for the fourth quarter.
Sources:
- Reuters
- TrendForce
Note: The article has been rewritten to maintain the same content while ensuring proper grammar, coherence, and formatting. The headings and subheadings have been preserved, and the text has been optimized for SEO using Markdown syntax.
