Samsung’s Q4 Earnings May Be Affected by Nvidia’s AI Chip Supply Delay

Despite Recent Efforts to Boost Performance

Samsung Electronics, the world’s top memory chip maker, is anticipated to report its profit growth slowing down in the fourth quarter as it grapples with strong demand from Nvidia for AI chips.

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Forecasted Profit Growth Continues to Slump

The South Korean tech giant is expected to estimate its operating profit rose to 8.2 trillion won ($5.6 billion) in the quarter ended December, up from a low base of 2.8 trillion won a year earlier but down from 9.18 trillion won in the preceding quarter. A slew of analysts have cut their earnings estimates in recent weeks, with some predicting operating profit to fall below 8 trillion won.

Analysts’ Downgrade Reflects Industry Challenges

In October, Samsung made a rare apology for its disappointing third-quarter performance and stated it was making progress in supplying AI chips to Nvidia. However, the company has not provided any update since then, and delays to providing Nvidia with high-end chips have continued to weigh on its earnings, analysts said.

Leadership Changes Aim to Boost Performance

In November, Samsung replaced some of its top executives in the chip division while naming its chip division chief co-CEO and giving him direct control of its struggling memory chip business. The leadership changes were intended to boost performance and address challenges facing the company’s chip segment.

Samsung’s Struggling Chip Business

Shares of Samsung, South Korea’s most valuable stock, slumped 32% last year, lagging the wider market’s 10% loss. In contrast, its cross-town rival SK Hynix is expected to post record earnings for the fourth quarter, analysts said.

Price Pressure Weighs on Chip Market

Lacklustre 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 last month forecast quarterly revenue and profit below Wall Street estimates, sending shares lower as weak demand for consumer-centric products impacts the Samsung rival’s business.

DDR4 DRAM Chip Prices in Decline

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 offset the positive impact of the weaker local currency that boosts repatriated earnings from overseas.

The South Korean Won Hits a New Low

The South Korean won dropped to its weakest level in 15 years in December after President Yoon Suk Yeol’s martial law decree triggered political turmoil and U.S. President-elect Donald Trump advocates higher tariffs on imports.

Logic Chip Business Continues to Post Losses

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

Q4 Earnings Estimates from Samsung

The company will announce estimates on fourth-quarter revenue and operating profit on Wednesday. A detailed breakdown of earnings for each of its businesses, including the chip segment, is planned for release in late January.

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