Samsung Electronics, the world’s leading memory chipmaker and a household name in smartphones and televisions, is facing a mixed earnings report for Q4. The South Korean giant expects to report an operating profit of 8.2 trillion won ($5.6 billion) for the quarter ending in December.
While this marks a recovery from the 2.8 trillion won reported a year earlier, it represents a significant decline from the 9.18 trillion won in the previous quarter. This projection comes as delays in fulfilling Nvidia’s high demand for AI chips and weak demand for consumer electronics continue to weigh heavily on Samsung’s performance.
Several analysts have already lowered their forecasts, with some predicting that profits will fall below 8 trillion won.
Nvidia Chip Supply Woes
The rapid growth of AI technologies, driven largely by Nvidia, has been a mixed blessing for Samsung. As a key supplier of memory chips for Nvidia’s AI products, Samsung has struggled to meet demand. These supply chain bottlenecks have severely impacted earnings, with the company yet to provide a clear update on how it plans to resolve these delays.
This issue is not new. In October, Samsung issued a rare public apology for its disappointing Q3 results and assured investors that it was working to address the chip supply problems. However, with no substantial update since then, many in the market remain cautious.
Market Rivalry and Leadership Shifts
To combat these ongoing challenges, Samsung reshuffled its leadership in November. The company appointed the chip division chief as co-CEO, placing him directly in charge of its struggling memory chip business. This move is expected to bring more focus and agility to the company as it navigates a complex market.
Meanwhile, Samsung’s rival, SK Hynix, continues to thrive. As a major supplier of advanced AI memory chips to Nvidia, SK Hynix is expected to report record earnings for Q4. This stark contrast highlights the stiff competition in the semiconductor industry and the difficulty Samsung faces in maintaining its leadership position.
Chip Prices Come Under Market Pressure
Beyond Nvidia’s chip supply delays, Samsung is facing broader market pressures. Demand for traditional memory chips, which are essential for mobile phones and PCs, has been weaker than expected. Adding to the pressure, Chinese competitors have ramped up production, pushing down prices.
According to TrendForce, DDR4 DRAM prices dropped by 13% in Q4 and are projected to fall another 15% in Q1 2025. This price drop, coupled with weak demand for consumer electronics, has created a difficult environment for Samsung. The company is now feeling the strain from lower chip prices, which are impacting its overall profitability.
A Currency Boost Amid Turmoil
Despite these challenges, Samsung has experienced some relief from favorable exchange rates. The South Korean won fell to a 15-year low in December, boosting Samsung’s overseas earnings when repatriated. However, this silver lining comes amid growing political and economic uncertainty, with President Yoon Suk Yeol’s martial law decree and rising global trade tensions complicating the situation further.
Global Tech Landscape: A Mixed Bag
The semiconductor industry as a whole is facing difficult times. U.S.-based Micron Technology recently revised its quarterly revenue and profit forecasts downward, citing weak demand for consumer-centric chips.
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Despite these headwinds, Samsung continues to invest in its logic chip manufacturing business. However, this segment, which involves producing chips for clients like Qualcomm, has remained unprofitable and continues to be a drag on earnings.
What’s Next for Samsung?
Samsung is set to announce its official Q4 revenue and profit estimates this Wednesday. In late January, the company will release more detailed results, breaking down earnings by business unit.
Investors and industry analysts will be closely watching for any updates on Nvidia’s chip supply, as well as insights into Samsung’s broader strategy. As the tech giant navigates these challenges, the stakes remain high.
