Samsung Struggles to Meet Chip Profit Goals as Demand Stagnates

Samsung Electronics missed its fourth-quarter chip profit estimates, falling short of the expected 3 trillion won (£1.68bn) as competition intensified and demand for its products stagnated.

In its Friday report, Samsung revealed a 22 percent year-on-year increase in net income, reaching 7.754 trillion won (£4.65bn) for the fourth quarter. However, this marked a 23 percent decline compared to the previous quarter.

The company attributed the drop to sluggish demand for conventional memory chips and heightened market competition.

Additionally, Samsung acknowledged delays in advancing its high bandwidth memory (HBM) technology, which has affected its competitiveness in the AI chip market.

“We expect some temporary restrictions in our HBM chip sales during the first quarter,” said Kim Jae-june, executive vice president of Samsung’s memory business, in an interview with Reuters. “We also anticipate a decline in HBM demand due to U.S. restrictions on high-end chip exports and a shift in demand from major clients,” he added.

Samsung also warned that sales of its AI chips could be sluggish due to U.S. export restrictions to China.

The company cited reduced profitability in its core semiconductor business as another contributing factor to the downturn. Operating profit in the semiconductor division fell by approximately 2.9 trillion won (£1.74bn), down from 3.9 trillion won (£2.34bn) in the previous quarter and 6.5 trillion won in the second quarter.

Competitors like SK Hynix have gained ground in this sector, having begun mass production of HBM products last year, while Samsung is still conducting testing with major clients such as Nvidia.

In its mobile division, Samsung’s operating profit dropped by 25 percent from the previous quarter due to increasing competition and the waning impact of recently launched products.

Profit from the television division also saw a significant drop, falling by 60 percent.

Looking ahead, Samsung, the world’s largest chip maker, expects limited overall earnings growth in the first quarter of 2025 as challenges in the semiconductor sector persist. However, the company remains optimistic about the launch of new products, such as the latest Galaxy phone series, which could boost its mobile division. Samsung has also projected a recovery in the memory market in the second quarter.