Samsung Electronics is set to report its preliminary fourth-quarter (Q4) earnings this week, with analysts predicting a marked slowdown in profit growth. The memory chip producer continues to face hurdles, including delays in supplying advanced artificial intelligence (AI) chips to Nvidia and a downturn in its traditional chip and smartphone markets, reported Reuters.
The South Korean giant, which also leads the global markets in smartphones and televisions, is forecast to post an operating profit of around KRW8.2 trillion ($5.7bn) for the quarter ending December 2024. While this marks a recovery from the KRW2.8 trillion ($1.9bn) reported in the same period a year ago, it reflects a decline from the KRW9.18 trillion ($6.3bn) recorded in the previous quarter.
Industry analysts have recently lowered their expectations, with some estimating operating profits could fall below KRW8 trillion ($5.5bn). This comes amid broader industry challenges, including declining chip prices and sluggish demand for consumer electronics. Samsung is projected to report a total revenue of approximately KRW76 trillion won ($52bn) for the fourth quarter. The company plans to release detailed earnings later in January, providing a breakdown of performance across its various divisions.
Profit estimates reflect mixed performance
Samsung’s ongoing difficulties in meeting Nvidia’s demand for advanced AI chips remain a major concern. The company issued a rare apology in October 2024 for its underwhelming third-quarter results, acknowledging delays in AI chip production. However, it has provided few updates since, leading to further speculation about its ability to deliver on commitments in this critical growth area.
To address its challenges, the company reorganised its leadership in November 2024, appointing the head of its chip division as co-CEO and granting him direct oversight of the memory chip business. While the move signalled the company’s focus on reviving its core operations, it has yet to yield tangible improvements.
The semiconductor market has grown increasingly competitive, with Chinese manufacturers ramping up production and driving down prices for traditional memory chips. Prices for DDR4 DRAM chips, commonly used in PCs, fell by up to 13% in the fourth quarter and are expected to drop another 15% in the current quarter, according to research firm TrendForce. Adding to the pressure, Samsung’s domestic rival SK Hynix is poised to report record earnings, thanks to its role as a major supplier of advanced AI memory chips to Nvidia. The contrasting fortunes of the two companies highlight the growing divide in the industry, as demand for AI-related chips surges while traditional chip markets remain weak.
The depreciation of the South Korean won to its weakest level in 15 years has offered a modest boost to Samsung by increasing the value of overseas earnings when converted to local currency. However, this benefit has been insufficient to offset the broader challenges in its semiconductor, smartphone, and display segments. Weak demand for smartphones has particularly weighed on Samsung’s display division, which supplies screens for its own devices as well as those of competitors.
Read more: Samsung plans to slash overseas workforce by up to 30% in certain units
