Samsung’s Q4 earnings expected to be hit by Nvidia AI chip supply delay

SEOUL - Samsung Electronics, the world’s top memory-chip maker, is expected to forecast on Jan 8 that its profit growth continued to slow in the fourth quarter as it struggled to keep up with Nvidia’s strong demand for artificial intelligence (AI) chips.

Samsung, also the world’s largest smartphone and TV maker, is expected to estimate that its operating profit rose to 8.2 trillion won (S$7.6 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.

A slew of analysts has cut earnings estimates in recent weeks, with some analysts expecting operating profit to fall below eight trillion won.

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.

But 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.

In November, Samsung replaced some of its top executives in the chip division, while naming the head of its chip division co-chief executive officer and bestowing him direct control of its struggling memory chip business.

Shares of Samsung – South Korea’s most valuable stock – slumped 32 per cent in 2024, lagging the wider market’s 10 per cent loss.

In contrast, Samsung’s 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.

Prices under pressure

Lacklustre demand for traditional chips used in mobile phones and personal computers (PCs), as well as rising output from Chinese rivals, has put pressure on chip prices, analysts said.

US chipmaker Micron Technology in December 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.

Prices of DDR4 Dram chips used in PCs fell as much as 13 per cent in the fourth quarter and are expected to decline another 15 per cent 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 dropped to its weakest level in 15 years in December after President Yoon Suk Yeol’s martial law decree triggered political turmoil and US President-elect Donald Trump advocates higher tariffs on imports.

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. REUTERS