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
TARIFF TRADE-OFF: Machinery exports to China dropped after Beijing ended its tariff reductions in June, while potential new tariffs fueled ‘front-loaded’ orders to the US The nation’s machinery exports to the US amounted to US$7.19 billion last year, surpassing the US$6.86 billion to China to become the largest export destination for the local machinery industry, the Taiwan Association of Machinery Industry (TAMI, 台灣機械公會) said in a report on Jan. 10. It came as some manufacturers brought forward or “front-loaded” US-bound shipments as required by customers ahead of potential tariffs imposed by the new US administration, the association said. During his campaign, US president-elect Donald Trump threatened tariffs of as high as 60 percent on Chinese goods and 10 percent to 20 percent on imports from other countries.
Taiwanese manufacturers have a chance to play a key role in the humanoid robot supply chain, Tongtai Machine and Tool Co (東台精機) chairman Yen Jui-hsiung (嚴瑞雄) said yesterday. That is because Taiwanese companies are capable of making key parts needed for humanoid robots to move, such as harmonic drives and planetary gearboxes, Yen said. This ability to produce these key elements could help Taiwanese manufacturers “become part of the US supply chain,” he added. Yen made the remarks a day after Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) said his company and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) are jointly
United Microelectronics Corp (UMC, 聯電) expects its addressable market to grow by a low single-digit percentage this year, lower than the overall foundry industry’s 15 percent expansion and the global semiconductor industry’s 10 percent growth, the contract chipmaker said yesterday after reporting the worst profit in four-and-a-half years in the fourth quarter of last year. Growth would be fueled by demand for artificial intelligence (AI) servers, a moderate recovery in consumer electronics and an increase in semiconductor content, UMC said. “UMC’s goal is to outgrow our addressable market while maintaining our structural profitability,” UMC copresident Jason Wang (王石) told an online earnings
MARKET SHIFTS: Exports to the US soared more than 120 percent to almost one quarter, while ASEAN has steadily increased to 18.5 percent on rising tech sales The proportion of Taiwan’s exports directed to China, including Hong Kong, declined by more than 12 percentage points last year compared with its peak in 2020, the Ministry of Finance said on Thursday last week. The decrease reflects the ongoing restructuring of global supply chains, driven by escalating trade tensions between Beijing and Washington. Data compiled by the ministry showed China and Hong Kong accounted for 31.7 percent of Taiwan’s total outbound sales last year, a drop of 12.2 percentage points from a high of 43.9 percent in 2020. In addition to increasing trade conflicts between China and the US, the ministry said
RSS