Samsung Electronics estimated operating profit more than doubled in the fourth quarter from the previous year, but its numbers on Wednesday fell far short of analyst expectations, fuelling concerns about the South Korean company’s continuing technological weakness.
Operating profit at the world’s largest maker of memory chips, smartphones and televisions was estimated at Won6.5tn ($4.5bn) in preliminary figures for its October-December quarter, missing the Won7.7tn forecast by analysts according to LSEG SmartEstimate.
Samsung said earnings in its core semiconductor division were hit by cooling demand for computers and handsets and the greater investments needed to expand capacity for advanced chip manufacturing.
Analysts said the business was affected by an oversupply of conventional memory chips, increasing losses at its contract manufacturing arm and delays in supplying its latest HBM3E chips for Nvidia’s artificial intelligence products.
Last month, US rival Micron Technology also forecast quarterly revenue and profit below analyst estimates due to lower chip prices.
Samsung’s weaker than expected earnings underline investor concern that the company is falling further behind rival SK Hynix in the high-bandwidth memory chips used in AI hardware.
Jensen Huang, Nvidia’s chief executive, told reporters in Las Vegas on Tuesday that Samsung had to “engineer a new design” to supply HBM chips to his company, although he added that “they can do it and they are working very fast”.
“They are working on it. They will succeed, no question they will succeed,” he added. “Remember Samsung created HBM . . . the very first HBM memory at Nvidia that we used was from Samsung. They will recover, it’s a great company.”
Despite disappointing earnings, Samsung shares jumped 2.9 per cent on Wednesday on expectations of chip demand recovery. The shares slumped more than 30 per cent last year, prompting the company to issue a rare apology in October for its poor performance.
Gaining ground in the advanced HBM market is crucial for Samsung’s share price recovery, analysts said. “It is important for the company to regain technological edge for the sustained stock price recovery by showing achievements in the HBM business and boosting its operating ratio at the foundry [contract manufacturing] business,” analysts at Shinhan Securities said in a report.
Analysts expect SK Hynix to report record quarterly earnings this month on strong demand for its HBM chips. Microsoft last week said it planned to spend $80bn on developing AI products and data centres this year.
On top of falling chip prices, intensifying competition is also hurting Samsung’s mobile business. The company is expected to launch new flagship phones this month to regain market share amid tougher competition from Apple and Chinese rivals.
The performance of the upcoming Galaxy S25 model will be pivotal for Samsung to take on the iPhone and Android-powered devices boasting AI features.
Samsung, which pioneered foldable devices, is struggling to stave off competition from Chinese contenders offering slick alternatives.
The company is due to announce detailed results later this month.
