The operating profit of South Korean tech giant Samsung Electronics Co sank almost a third in the fourth quarter of last year owing to spending on research, the company said yesterday, as analysts said it was struggling to meet demand for chips used in artificial intelligence (AI) servers.
The world’s largest memorychip maker had already acknowledged in October last year that it was facing a “crisis,” and acknowledged questions had arisen about its “fundamental technological competitiveness and the future of the company.”
Samsung said operating profit fell to 6.5 trillion won (US$4.5 billion) in October-December, from 9.18 trillion won in the previous three months. However, it was up 130 percent year-on-year.
Photo: EPA-EFE
Sales rose 11.8 percent to 75.78 trillion won and net profit rose 22.2 percent to 7.75 trillion won year-on-year, topping forecasts according to Yonhap News Agency.
The firm said the fourth-quarter fall-off was down to “soft market conditions especially for IT products, and an increase in expenditures including R&D,” as well as the “initial ramp-up costs to secure production capacity for cutting-edge nodes.”
It warned that in the first three months of this year “overall earnings improvement may be limited due to weakness in the semiconductors business.”
US titan Nvidia Corp, whose semiconductors power the AI industry, has been relying on SK Hynix Inc as its main supplier of high-bandwidth memory (HBM) chips for its AI graphics processing units (GPU), while Samsung has been struggling to meet the US firm’s requirements.
Still, Bloomberg reported yesterday that Samsung had obtained approval to supply a “version of its fifth-generation high-bandwidth memory chips” to Nvidia, citing people familiar with the matter. Samsung declined to comment on the report.
The earnings figures come as industry leaders try to assess the outlook for the sector after Chinese start-up DeepSeek (深度求索) unveiled a groundbreaking chatbot that performed as well as AI pacesetters — apparently for a fraction of the cost.
News of DeepSeek’s new R1 chatbot has sparked a rout in tech titans and raised questions about the hundreds of billions of dollars invested in AI in recent years.
Worries about the impact of DeepSeek battered stocks in Seoul yesterday as the market reopened after an extended break.
Samsung ended down more than 2 percent, while SK Hynix lost 9.9 percent, having earlier plunged almost 12 percent.
Jaejune Kim, executive vice president of Samsung’s memory business, said in an earnings call that the company was “monitoring industry trends considering various scenarios,” as it also supplies HBM chips used in GPUs to various clients.
“While it is premature to make judgements based on the currently limited information, we anticipate that long-term opportunities and short-term risks will coexist in the market,” he said.
He added that Samsung was determined to “actively respond to the rapidly evolving AI market.”
Counterpoint Research vice president Neil Shah said DeepSeek’s “frugal innovation” could potentially slow down or stretch the hundreds of billions of dollars in AI infrastructure investments over the years.
“So, this could be a ‘blessing in disguise’ for Samsung, allowing them to take the time needed to perfect their solution or to lower costs,” he added.
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