Samsung’s Profit Growth Slows Amid AI Chip Demand
The world’s top memory chip maker, Samsung Electronics, is bracing for a slowdown in profit growth in the fourth quarter. The South Korean giant is expected to report an operating profit of 8.2 trillion won ($5.6 billion) for the quarter ended December, a modest increase from 2.8 trillion won a year earlier, but a decline from 9.18 trillion won in the previous quarter.
Nvidia’s Strong Demand Puts Pressure on Samsung
Samsung’s struggles to meet Nvidia’s demand for AI chips have taken a toll on its earnings. Despite apologizing for its disappointing third-quarter performance and promising to improve, the company has not provided any updates, and delays in supplying high-end chips to Nvidia have continued to weigh on its earnings.
Executive Shakeup and Chip Division Revamp
In November, Samsung replaced some of its top executives in the chip division and named its chip division chief co-CEO, giving him direct control of its struggling memory chip business. However, this move has yet to yield significant results.
Shares Slump Amid Wider Market Losses
Samsung’s shares, South Korea’s most valuable stock, plummeted 32% last year, underperforming the wider market’s 10% loss. In contrast, its 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.
Chip Prices Under Pressure
Lackluster demand for traditional chips used in mobile phones and PCs, combined with rising output from Chinese rivals, has put pressure on chip prices. U.S. chipmaker Micron Technology’s recent forecast of quarterly revenue and profit below Wall Street estimates has sent shares lower, highlighting the impact of weak demand on Samsung’s business.
DDR4 DRAM Chip Prices Fall
Prices of DDR4 DRAM chips used in personal computers fell as much as 13% in the fourth quarter and are expected to decline another 15% in the current quarter, according to estimates from researcher TrendForce. This decline has offset the positive impact of the weaker local currency on repatriated earnings from overseas.
Logic Chip Business Struggles
Samsung’s business of making logic chips designed by customers like Qualcomm is expected to continue to make losses, eroding its chip earnings. The company will announce estimates on fourth-quarter revenue and operating profit on Wednesday, with a plan to release detailed results including a breakdown of earnings for each of its businesses in late January.
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