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SEOUL (Reuters) – Samsung Electronics, the world’s top memory chip maker, is expected to forecast on Wednesday that its profit growth continued to slow in the fourth quarter. The company, which also serves as the world’s largest smartphone and TV maker, is projected to estimate its operating profit rising to 8.2 trillion won ($5.6 billion) for the quarter ended December. This figure represents an increase from a base of 2.8 trillion won a year earlier but marks a decline compared to the previous quarter’s 9.18 trillion won.
Analysts have expressed concern, with some predicting that operating profit may fall below 8 trillion won. In October, the South Korean company made a rare public apology for its disappointing third-quarter performance and stated that it was making progress in supplying AI chips to Nvidia. However, since then, delays in delivering high-end chips to Nvidia have weighed on Samsung’s earnings, according to industry observers.
In November, Samsung announced changes within its chip division, including the replacement of some top executives and appointing a new co-CEO to lead the struggling memory chip business. This restructuring has aimed to improve efficiency and focus on key areas. Despite these efforts, shares of Samsung dropped significantly last year, outperforming only the broader market’s 10% loss.
Meanwhile, analysts predict that SK Hynix, Samsung’s major rival in advanced AI memory chips for Nvidia, is set to post record earnings in the fourth quarter. This dynamic underscores the intense competition in the chip industry and its impact on pricing.
Lack of Demand for Traditional Chips
The slow growth in Samsung’s profit is partly attributed to weak demand for traditional chips used in mobile phones and PCs. The global shortage of semiconductors has exacerbated this issue, particularly as China continues to boost production capacity. This lack of demand has put pressure on chip prices, which have fallen significantly due to increased supply from Chinese manufacturers.
Impact of U.S. Tariffs
U.S.-specific developments have further complicated Samsung’s financial situation. Earlier in the year, U.S. chipmaker Micron Technology forecasted that quarterly revenue and profit would fall below Wall Street estimates, citing weak demand for consumer-centric products as a drag on its performance. Additionally, prices of DDR4 DRAM chips used in personal computers have dropped sharply, with estimates suggesting a further 15% decline this quarter.
The impact of these price reductions has been partially offset by the weaker South Korean won, which enhances the returns from overseas operations due to repatriation benefits. The South Korean currency fell to its weakest level in 15 years in December after President Yoon Suk Yeol’s martial law decree sparked political turmoil and U.S. President-elect Donald Trump advocated for higher tariffs on imports.
Challenges in Achieving Profits
Analysts have expressed concern that Samsung’s business of making logic chips designed by customers like Qualcomm is expected to continue to make losses, eroding its chip earnings. This ongoing loss has already impacted the company’s overall profitability and has contributed to downward pressure on its stock price.
Fourth-Quarter Earnings Outlook
Samsung will announce its fourth-quarter revenue and operating profit forecast on Wednesday. The company also plans to release detailed results, including a breakdown of earnings for each of its businesses, in late January. These announcements are crucial in gauging the company’s financial health and performance moving forward.
This article reflects the complex challenges facing Samsung in an industry marked by rapid technological change and global competition. As the demand for AI-driven chips continues to grow, Samsung will need to adapt its strategies to maintain its position as a leader in the semiconductor market.