Samsung Electronics has announced that a slowdown in demand for its memory chips is likely to restrict earnings growth in the upcoming quarter. This challenge is intensified by U.S. restrictions on supplying advanced semiconductors used in artificial intelligence (AI) devices.
On Friday, the South Korean firm projected that overall memory chip demand would begin to recover by the second quarter. However, its stock fell approximately 2.5% due to concerns over the anticipated weak earnings.
In a statement, Samsung, the largest memory chip manufacturer globally, indicated that “in the first quarter of 2025, overall earnings improvement may be limited due to weakness in the semiconductor sector.”
Kim Jae-june, executive vice president of Samsung’s memory division, noted that there will be short-term limitations on high-bandwidth memory (HBM) chip sales in the first quarter as a result of U.S. export restrictions and a shift in demand for improved chips from major clients.
Samsung has faced difficulties capitalizing on the surge in AI investments. Its HBM AI chips do not match the performance of those produced by SK Hynix, another key player in the market, nor have they gained approval from Nvidia, a critical customer. Additionally, the company is contending with a slowdown in the DRAM chip market, partly due to its significant dependence on commodity chips and increasing competition from Chinese manufacturers such as CXMT.
SK Hynix’s shares dropped as much as 12% on Friday after markets reopened, reflecting concerns that investment in data centers may have peaked, spurred by worries over AI model budget constraints.
During a briefing with analysts, Samsung executives revealed that the company is reducing its focus on traditional memory semiconductors to prioritize higher-margin chips for AI servers, where demand continues to be robust. However, its contract-chipmaking division is struggling due to reduced demand for chips used in smartphones and PCs.
Samsung’s capital expenditures in memory chips are expected to remain similar to last year’s figures. The company reported total capital expenditure of approximately Won53.6 trillion ($37 billion) last year, primarily allocated to its chip division.
To enhance its competitiveness in HBM, Samsung has reorganized its engineering teams. However, Nvidia’s CEO Jensen Huang stated that Samsung needs to create a new design for HBM chips to supply his company, although he acknowledged their rapid progress.
For the first time, SK Hynix surpassed Samsung in quarterly profits during the fourth quarter, thanks to its lead in HBM sales, which it anticipates will double this year. Samsung’s chip division announced an operating profit of Won2.9 trillion for the October-December period, representing a 26% decline from the previous quarter.
Market analysts express concerns over Samsung’s declining leadership in HBM technology and increasing exposure to competition from Chinese manufacturers in the commodity memory segment.
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