Seoul, South Korea – Samsung Electronics, the world’s largest memory chip maker, is set to release its fourth-quarter earnings report on Wednesday. The company is expected to forecast a slowdown in profit growth due to challenges in meeting demand for AI chips from Nvidia.
Samsung, which also tops the global rankings in smartphone and TV sales, is anticipated to estimate its operating profit rose to 8.2 trillion won ($5.6 billion) in the quarter ended December. This represents an increase from the low base of 2.8 trillion won a year earlier but a decline from 9.18 trillion won in the preceding quarter.
Analysts’ Estimates: A Mixed Bag
A number of analysts have trimmed their earnings forecasts in recent weeks, with some predicting operating profit will fall below 8 trillion won. This downward revision reflects concerns about Samsung’s ability to supply Nvidia with high-end chips on time.
Delays and Challenges in Meeting AI Chip Demand
In October, the South Korean company issued a rare apology for its underwhelming third-quarter performance. At the time, it stated that progress was being made in supplying AI chips to Nvidia. However, delays in providing these high-end chips have continued to weigh on Samsung’s earnings.
Executive Changes and Restructuring Efforts
In November, Samsung replaced some of its top executives in the chip division. The company also named its chip division chief co-CEO and granted direct control over its struggling memory chip business to this individual. These moves are seen as part of a broader effort to turn around the chip division.
Samsung’s Stock Performance: A Lagging Indicator
The shares of Samsung, South Korea’s most valuable stock, declined by 32% last year. This drop outpaced the wider market’s 10% loss. In contrast, its cross-town rival SK Hynix is expected to post record earnings for the fourth quarter.
Prices Under Pressure: A Perfect Storm
Lackluster demand for traditional chips used in mobile phones and PCs has put downward pressure on chip prices. Furthermore, rising output from Chinese rivals has exacerbated this trend. The U.S.-based chipmaker Micron Technology recently forecast quarterly revenue and profit below Wall Street estimates, sending its shares lower.
DDR4 DRAM Chip Prices: A 15% Decline Expected
According to TrendForce, a research firm, prices of DDR4 DRAM chips used in personal computers fell by as much as 13% in the fourth quarter. It is expected that these prices will decline another 15% in the current quarter.
The Impact of a Weaker Won on Earnings
Although a weaker South Korean won has boosted repatriated earnings from overseas, this positive impact has been offset by the decline in chip prices.
Samsung’s Logic Chip Business: A Continuing Loss
Samsung’s business of making logic chips designed by customers like Qualcomm is expected to continue to make losses. This erosion will further reduce its chip earnings.
Earnings Release and Breakdown
Samsung will announce estimates for fourth-quarter revenue and operating profit on Wednesday. The company plans to release detailed results, including a breakdown of earnings for each of its businesses, in late January.
As the world’s leading memory chip maker navigates challenges in meeting AI chip demand and faces pressure from declining chip prices, investors will be watching closely as Samsung releases its fourth-quarter earnings report. Will the company meet expectations or continue to struggle with profit growth? Only time will tell.
