Samsung Electronics recently projected a decline in artificial intelligence (AI) chip sales for the current quarter, citing U.S. export restrictions to China and ongoing efforts to enhance its high-end chip offerings. While advanced AI chips have provided a glimmer of hope in the otherwise weak memory chip market, Samsung faces challenges in meeting the demands of key players like Nvidia, who primarily rely on competitor SK Hynix for high-bandwidth memory (HBM) chips crucial for AI graphic processing units (GPUs).
Table Content:
US Export Restrictions and Demand Shift Impacting Sales
The U.S. implemented stricter regulations on China’s semiconductor industry in December, including limitations on HBM chip sales. Analysts estimate that Chinese customers account for approximately 20% of Samsung’s HBM sales, making the company significantly more vulnerable to these restrictions than its competitors.
“There will be some temporary restrictions in our HBM chip sales in the first quarter,” acknowledged Kim Jae-june, executive vice president of Samsung’s memory business, during an earnings call. He further elaborated that the anticipated impact on HBM demand stems not only from the U.S. export restrictions but also from a shift in demand towards improved chips by major clients.
Samsung, which commenced sales of 8-layer and 12-layer HBM3E products in the third quarter, plans to launch an enhanced version of its HBM3E products in March.
Samsung showcases its Galaxy S25 smartphone series and previews the thinner Edge model at a presentation in San Jose, USA.
Nvidia’s Requirements and Supply Chain Dynamics
Nvidia CEO Jensen Huang recently highlighted the need for Samsung to “engineer a new design” to adequately supply HBM chips to the company, according to a report by Korea JoongAng Daily. Bloomberg, citing sources, reported that Samsung has secured approval from Nvidia to supply less-advanced HBM chips. While Samsung reported progress in supplying HBM chips to Nvidia in October, no further public updates have been provided.
Kim also pointed out that GPU supply constraints have caused project delays for some customers, consequently affecting demand for memory chips used in data center servers. The scarcity of Nvidia’s GPU chips is attributed to strong demand and inherent engineering complexities in their production.
Limited Earnings Growth and Market Outlook
Samsung confirmed a fourth-quarter operating profit of 6.5 trillion won ($4.48 billion), representing a 29% decrease from the previous quarter. The company anticipates limited earnings growth in the first quarter due to persistent weakness in the memory chip market, including sluggish demand for smartphones and personal computers.
Samsung presents the Galaxy S25 smartphone series and the thinner Edge model at a presentation in San Jose, USA.
Forecasting a slowdown in mobile phone market growth this year, Samsung cited potential uncertainties stemming from policy changes and inflationary pressures impacting consumer sentiment. Despite unveiling its latest AI-powered Galaxy flagship phone last week, Samsung faces challenges in reviving mobile margins above 10% this quarter due to competition from Apple and Chinese rivals.
The company’s decision to utilize Qualcomm’s application processors for the entire Galaxy S25 lineup, replacing its own Exynos mobile chip, is expected to contribute to continued weakness in its logic chip design business this quarter. Following a four-day holiday break, Samsung shares declined 2.8%, compared to a 0.75% drop in the broader market. SK Hynix shares experienced a more significant 9.6% decline due to concerns surrounding the impact of the low-cost Chinese AI model DeepSeek.
Anticipating Market Recovery and Future Performance
Samsung, the world’s leading memory chip manufacturer, anticipates a recovery in overall memory market demand starting in the second quarter. Analysts suggest that Samsung’s 2025 performance and stock price will heavily rely on its ability to supply substantial volumes of advanced 12-layer HBM3E chips to Nvidia. Both SK Hynix and TSMC, the world’s largest contract chipmaker, reported record quarterly profits this month driven by the AI boom, with SK Hynix surpassing Samsung’s figures for the first time. While Samsung’s fourth-quarter operating profit showed a 130% increase year-over-year from a low base, reflecting the memory chip industry’s recovery from a significant downturn, its mobile phone business experienced a 22% decline in operating profit to 2.1 trillion won. The chip division’s operating profit of 2.9 trillion won was less than half of SK Hynix’s 8.08 trillion won profit during the same period. Samsung indicated that memory chip capital spending for 2025 would likely be similar to last year’s investment, although detailed investment plans are yet to be finalized.
