Samsung Electronics Co said yesterday it expected fourth-quarter profits to fall sharply from the previous quarter and miss forecasts as it struggled to meet robust demand for chips used in artificial intelligence (AI) servers.
The company said in a regulatory filing that October-to-December operating profits were expected to come in at 6.5 trillion won (US$4.5 billion), up 130.5 percent from a year earlier. However, that is down nearly 30 percent from 9.18 trillion won in the previous three months and 16 percent below the average estimate, according to the Yonhap news agency, which cited its own financial data firm.
Sales were seen increasing 10.7 percent year-on-year to approximately 75 trillion won, which was also lower than the previous quarter.
Photo: Reuters
“In light of the preliminary fourth-quarter 2024 results significantly falling short of market expectations, we aim to mitigate confusion among the market and investors until the final results are announced,” Samsung said.
The company’s device solutions division, which is in charge of memory and foundry business units, among others, “reported declines in sales and profits due to worsening market conditions, particularly for IT-related products,” it said.
“Despite achieving record-high quarterly revenue in the fourth quarter, driven by strong sales of high-capacity products, weak demand for conventional PC and mobile products weighed on overall performance,” the company said.
Non-memory business performance also declined because of “weak demand from key applications” and “increased R&D spending,” it said.
Samsung’s consumer electronics division, which includes mobile phones, also experienced a decline owing to “reduced impact from new mobile product launches and intensified competition,” it added.
Samsung is expected to release its final earnings report at the end of this month.
Last year, Samsung’s foundry business faced multiple challenges, including “order losses from key customers in advanced processes, the gradual end-of-life of certain products and a slow recovery in mature process segments”, TrendForce Corp (集邦科技) analyst Eden Chung (鐘映庭) said. “Consequently, the company’s annual revenue is expected to remain largely flat compared with 2023.”
Observers predict the electronics industry would typically face seasonal production slowdowns in the current quarter.
“We expect further declines in contract prices for both conventional DRAM and NAND flash,” TrendForce analyst Tom Hsu (許家源) said.
Those would “continue to exert downward pressure on Samsung’s consolidated revenue and operating profit on a quarterly basis,” he said.
For Nvidia Corp cofounder and CEO Jensen Huang (黃仁勳), Samsung has faced difficulties producing a new type of memory chip for AI systems, although he is still confident that the partner company would overcome the challenges.
The chip in question — the latest type of high-bandwidth memory (HBM) — is a vital part of new AI systems that feature Nvidia chips.
Samsung has been slower than rivals such as SK Hynix Inc in producing HBM that meets Nvidia’s standards, and Huang acknowledged those challenges during a news briefing at CES in Las Vegas on Tuesday.
“They have to engineer a new design,” Huang said at the event. “But they can do it. They are working very fast. They’re very committed to do it.”
Trying to increase the speed and capacity of memory — and tightly integrate the components with processors — has added new levels of complexity to production of the chips. Samsung has been working through those obstacles.
“They’re going to succeed — no question,” Huang said. “I have confidence that Samsung will succeed with HBM.”
Additional reporting by Bloomberg
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