Samsung Electronics has revealed its operating profit estimate for the fourth quarter of 2024, revealing a figure of 6.5 trillion won (£4.47 billion).
This is a big miss compared to analysts’ expectations of 7.7 trillion won, with difficulties in the memory chip and consumer electronics markets.
The company reported consolidated sales of approximately 75 trillion won, with figures ranging between 74 trillion and 76 trillion won, in line with Korean accounting standards.
While Samsung Electronic’s profit is 131% higher than the same period last year, it represents a 29% decline from the third quarter.
High Costs and Slowing Demand
Samsung attributed the weaker earnings to high research and development expenses and increased investment in advanced chip manufacturing.
Added to this, a decline in demand for conventional memory chips used in mobile phones and PCs weighed on its results. The company also faced challenges in its logic chip business, pointing to lower factory utilisation rates and reduced smartphone demand.
The devices segment, which includes mobile phones, TVs, and home appliances, saw earnings shrink due to intense competition and fading demand for recently launched smartphone models.
Analysts disclose that these challenges overshadowed the favourable impact of a weaker South Korean won, which typically boosts overseas earnings when converted back to the local currency.
High-Bandwidth Memory (HBM) Supply Issues
Samsung’s limitations in delivering high-bandwidth memory (HBM) chips for artificial intelligence applications to Nvidia have also drawn attention. Nvidia CEO Jensen Huang recently noted that Samsung needs to redesign its chips to meet the company’s requirements but was confident in its ability to do so.
Rival SK Hynix, a major supplier of advanced AI memory chips to Nvidia, has capitalised on the demand, leaving Samsung lagging in the competitive AI chip market. Analysts believe it will take time for Samsung to close this gap, further impacting its performance in the high-margin sector.
Samsung’s shares saw an initial dip of 1% in early trading but later rebounded, ending the day with a slight gain. Nonetheless, the company’s stock underperformed last year, declining 32%, compared to the broader market’s 10% drop.
Analysts remain cautious, with some suggesting that Samsung’s major businesses risk losing competitiveness.
However, there is hope that chip demand may have reached its lowest point, and improvements in smartphone demand in China could offer some relief in the coming months.
Detailed financial results, including a breakdown of earnings by business segment, will be released on 31 January.
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