Samsung Electronics has cautioned that its sales of artificial intelligence (AI) chips will remain sluggish in the current quarter, due to ongoing US export restrictions to China and challenges in meeting the high-bandwidth memory (HBM) chip demands of key client Nvidia.
Despite AI chips being a stronghold in the weak memory chip market, the South Korean tech giant faces significant hurdles in the competitive landscape, particularly against rival SK Hynix, which supplies Nvidia with the essential HBM chips for its AI graphics processing units (GPUs).
During an earnings call on Friday, Kim Jae-june, executive vice president of Samsung’s memory business, confirmed the difficulties. “There will be some temporary restrictions in our HBM chip sales in the first quarter,” he stated.
Kim explained that not only would US restrictions on the export of high-end chips impact demand, but there was also a shift in the needs of major clients for upgraded chip versions.
Samsung, which began shipping 8-layer and 12-layer HBM3E products in Q3 2024, plans to launch improved versions of these chips in March, a move aimed at addressing the evolving requirements of its clients.
However, it is still facing supply constraints. The company is working to increase its HBM supply for Nvidia, which has encountered challenges in obtaining sufficient chips to meet demand for its GPUs.
In early January, Nvidia CEO Jensen Huang noted that Samsung would need to “engineer a new design” to fulfil the chip requirements for its GPUs, according to Korea JoongAng Daily.
The US crackdown on China’s semiconductor industry, including restrictions on the sale of HBM chips, has particularly hit Samsung hard.
Analysts estimate that approximately 20% of Samsung’s HBM sales are directed to Chinese customers, a significant share that is now under threat due to the export bans.
The broader semiconductor environment remains challenging, with supply constraints for GPUs leading to delays in client projects, further affecting demand for memory chips used in data centres.
Despite these obstacles, Samsung remains cautiously optimistic about a recovery. The company has confirmed a 29% drop in its operating profit for Q4 2024, totalling 6.5 trillion won ($4.48 billion), compared to the previous quarter.
The company attributes this decline to weak demand in its memory chip business, as well as sluggish sales in smartphones and personal computers. Samsung’s mobile phone segment, in particular, saw a 22% drop in operating profit, totalling 2.1 trillion won.
The company also forecast limited growth for the first quarter of 2025 due to challenging business conditions.
The impact of US policy shifts and inflationary pressures are expected to dampen consumer sentiment, particularly in the mobile phone market.
Samsung’s flagship Galaxy S25 phone, unveiled last week, includes AI-powered features, but the company faces tough competition from Apple and Chinese rivals.
Additionally, Samsung’s decision to use Qualcomm’s application processors for the entire Galaxy S25 lineup—abandoning its own Exynos chips—has dealt a blow to its logic chip business, which is also expected to remain weak in the current quarter.
In a broader industry context, Samsung is facing increased pressure from SK Hynix, which recently reported record profits thanks to the booming AI market, surpassing Samsung’s numbers for the first time.
Analysts suggested that the future of Samsung’s memory business, as well as its stock performance, will largely depend on whether the company can secure a steady supply of advanced HBM3E chips to Nvidia.
Looking ahead, Samsung remains cautiously optimistic about a rebound in the memory chip market starting in Q2 2025.
However, analysts are paying close attention to how Samsung adapts to the fast-changing demands of AI chip markets and how it navigates ongoing geopolitical challenges.
While the company has not finalised detailed investment plans for 2025, it is expected to maintain its memory chip capital spending at levels consistent with the previous year.
Shares of Samsung have dropped 2.8% following the earnings report, while SK Hynix’s stock saw a sharp 9.6% decline amid concerns over the emergence of low-cost Chinese AI models, like DeepSeek, which could affect the overall semiconductor market.
Boluwatife Enome
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