Samsung Electronics has announced its fourth-quarter (Q4) earnings guidance for 2024, revealing mixed results for the tech giant. While the company projects a year-on-year (YoY) operating profit increase of 131%, the estimated figure of KRW6.5 trillion ($4.5bn) falls short of market expectations. Analysts had predicted a stronger performance, with estimates hovering around KRW7.7 trillion ($5.3bn) or higher.
The company’s guidance, disclosed in a regulatory filing, also forecasts consolidated sales of approximately KRW75 trillion ($51bn), representing a 10.7% rise from the same period in 2023. However, compared to the preceding quarter, operating profit fell by 29%, while sales dipped by 5.2%. Samsung is scheduled to release its detailed financial results on 31 January.
Challenges in the AI chip sector weigh on earnings
A significant factor in Samsung’s weaker-than-expected performance is the firm’s struggles in the high-bandwidth memory (HBM) chip market. These advanced chips are critical in powering AI applications and demand has surged as companies like Nvidia dominate the booming AI computing industry. Despite earlier commitments to bolster its HBM production, Samsung has yet to secure Nvidia’s approval to supply these chips, further delaying its market entry.
In contrast, rival SK hynix has already begun mass production of HBM chips for Nvidia, gaining a competitive edge. Analysts point to this gap as a key reason for Samsung’s inability to capitalise fully on the growing demand for AI accelerators, leaving the company trailing behind its smaller competitor in a pivotal sector.
Samsung attributed the disappointing quarter to a combination of rising research and development (R&D) expenses and investments in next-generation chip manufacturing processes. These efforts, aimed at advancing the company’s capabilities in high-end semiconductor technology, have significantly increased costs, pressuring the bottom line.
The company’s smartphone division also faced hurdles, citing reduced benefits from recent product launches and intensified competition in a saturated market. Samsung’s struggles in these areas have compounded its difficulties in meeting market expectations.
Despite the underwhelming fourth-quarter performance, Samsung’s full-year results show a marked recovery from a challenging 2023. For the entirety of 2024, the company reported a nearly fivefold increase in operating profit, climbing to KRW32.73 trillion from KRW6.57 trillion in the previous year. Annual revenue rose 15.9% to reach KRW300.08 trillion, driven by solid performance in certain segments.
However, the missed opportunity in the HBM market and declining memory prices remain sore points. These issues have persisted despite Samsung’s late 2023 executive reshuffle aimed at refocusing on high-end technologies and addressing its semiconductor division’s ongoing challenges.
Read more: Samsung to begin mass production of 2nm semiconductors in 2025
