Seoul (Reuters) – Samsung Electronics, the world’s top memory chip maker, is expected to forecast a slowdown in profit growth for the fourth quarter of 2023. The company struggled to meet the strong demand for AI chips from Nvidia, its major customer.

Background and Context

Samsung is also the world’s largest smartphone and TV manufacturer. Its operating profit is estimated to have risen to 8.2 trillion won ($5.6 billion) in the quarter ended December 2023. However, this growth is expected to be slower compared to the same period a year ago.

Analysts’ Expectations

A number of analysts have reduced their earnings estimates for Samsung in recent weeks. Some predict that the company’s operating profit will fall below 8 trillion won. In October 2023, Samsung made a rare apology for its disappointing third-quarter performance. The company stated that it was making progress in supplying AI chips to Nvidia but did not provide any updates since then.

Challenges and Delays

Delays in providing high-end chips to Nvidia have continued to impact Samsung’s earnings, according to analysts. In November 2023, Samsung replaced some of its top executives in the chip division, naming its chip division chief as co-CEO with direct control over its struggling memory chip business.

Market Performance and Competitor Comparison

Shares of Samsung, South Korea’s most valuable stock, declined by 32% last year. In contrast, its cross-town rival SK Hynix posted record earnings for the fourth quarter of 2023, according to analysts. SK Hynix is a major supplier of advanced AI memory chips to Nvidia.

Pressure on Chip Prices

Lackluster demand for traditional chips used in mobile phones and PCs has put pressure on chip prices. Rising output from Chinese rivals has also contributed to the decline in prices. U.S.-based Micron Technology recently forecasted quarterly revenue and profit below Wall Street estimates, sending shares lower due to weak demand for consumer-centric products.

Impact of Currency Fluctuations

The South Korean won dropped to its weakest level in 15 years in December 2023 after President Yoon Suk Yeol’s martial law decree triggered political turmoil. The weaker currency boosted repatriated earnings from overseas but was not enough to offset the decline in chip prices.

Losses in Logic Chip Business

Samsung’s business of making logic chips designed by customers like Qualcomm is expected to continue making losses, eroding its chip earnings.

Upcoming Earnings Announcement

Samsung will announce estimates for fourth-quarter revenue and operating profit on Wednesday. Detailed results including a breakdown of earnings for each of its businesses are planned to be released in late January 2024.

Additional Statistics

• DDR4 DRAM chips used in personal computers fell by as much as 13% in the fourth quarter of 2023.
• Prices of DDR4 DRAM chips are expected to decline another 15% in the current quarter, according to estimates from researcher TrendForce.

Sources and Credits

(Reporting by Hyunjoo Jin; Editing by Anne Marie Roantree and Jamie Freed)

View Comments (1)