Nvidia CEO says Samsung needs to redesign HBM, but expresses confidence in firm‘s success
Samsung Electronics on Wednesday estimated more than a twofold increase in its fourth-quarter operating profit compared to the same period in 2023, but the result fell short of market expectations, as the Korean tech giant struggled to keep pace with rivals in the pivotal AI chip sector.
In its earnings guidance, the world’s largest maker of memory chips and smartphones estimated an operating profit for the October to December period of 6.5 trillion won ($4.47 billion). The figure represents a whopping 130.5 percent increase year-on-year, but a 29.19 percent drop from the third quarter’s 9.18 trillion won.
The result also failed to reach the 8.21 trillion won consensus among local brokerages, provided by market intelligence firm FnGuide. This estimate had already been revised down from over 10 trillion won due to falling memory prices and delays in supply of critical high bandwidth memory, or HBM.
Revenue for the fourth quarter came to 75 trillion won, up 10.7 percent from a year earlier, but down 5.2 percent from the third quarter.
Samsung will release its full financial results on Jan. 31, which includes net earnings and performance breakdowns by business division.
On Wednesday, Samsung acknowledged the disappointing outcome, attributing it to rising research and development expenses and investments in manufacturing for advanced chip processes.
“Despite achieving record-high memory sales in the fourth quarter, the reduced profit was due to increased R&D expenses and initial ramp-up costs to expand advanced processes,” the firm said in a statement. “The non-memory (foundry) business also suffered due to weak demand in key applications like mobile devices, along with dropping utilization rates and rising R&D costs.”
The firm added that its smartphone business also faced challenges due to reduced benefits from new product launches and intensified competition.
Samsung has yet to provide details on its plan to supply advanced HBM chips — key components for artificial intelligence accelerators — to US AI giant Nvidia. Samsung’s failure to secure an earlier edge against its smaller crosstown rival SK hynix has continued to weigh on its earnings and wiped out billions of dollars of market value in the second half of last year.
Samsung is still awaiting approval from Nvidia, which enjoys a near-monopoly in the booming AI chip market, to use its HBM chips. In contrast, SK hynix has emerged as the market leader in HBM and has already begun mass production for Nvidia.
Nvidia founder and CEO Jensen Huang said Tuesday that Samsung needs to redesign its HBM chips, but expressed confidence in its success.
“They have to engineer a new design,” Huang told reporters at the CES 2025, the world’s largest tech show taking place in Las Vegas, referring to HBM chips. “But they could do it and they are working very fast. They are very committed to do it.”
“I have confidence that Samsung will succeed with HBM memory. I have confidence like tomorrow is Wednesday,” said Huang, mentioning that the very first HBM chip that the US firm ever used was from Samsung.
Despite disappointing earnings, Samsung’s shares rose 3.43 percent to close at 57,300 won on Wednesday. The increase appears to be in response to Huang’s vote of confidence in Samsung, as well as the resolution of uncertainties regarding the company’s performance, with the current stock price already reflecting anticipated concerns.
Analysts project continued challenges for Samsung’s various business sectors throughout this year, but hold out hope for a possible rebound.
“It will be difficult for Samsung to prove performance in the short term amid highlighted concerns, such as an oversupply of legacy memory, falling foundry utilization rates and delayed supply of HBM3E to major customers,” said Kim Hyung-tae, a researcher at Shinhan Securities.
Park Yoo-ak, a researcher at Kiwoom Securities, said the first quarter of this year will also see a decline in operating profit compared to the previous quarter. “But beyond this period, DRAM and foundry are expected to lead a rebound in overall performance,” he said.
“DRAM is projected to see a performance rebound in the second quarter as distribution inventories stabilize and with Samsung expected to enter the HBM3E business at full scale,” he said. “As for the foundry business, its operating loss is expected to be reduced as utilization rates increase for Exynos and CMOS image sensors.”
On an annual basis, Samsung’s revenue last year surpassed 300 trillion won for the first time since 2022. It posted revenue of 300.8 trillion won, up 15.9 percent from 2023, alongside an operating profit of 32.73 trillion won, up 398.2 percent.
By Ahn Sung-mi ([email protected])
