Samsung's Q4 Earnings: Nvidia AI Chip Supply Delay Looms Large
Monday, Jan 6, 2025 6:07 pm ET
Samsung Electronics, the world's leading semiconductor manufacturer, is expected to report its fourth-quarter earnings on Wednesday, with analysts anticipating a slowdown in profit growth due to the delay in Nvidia's AI chip supply. The delay, which has been ongoing since October, has impacted Samsung's chip division, which reported a 40% drop in profit last quarter. Despite the challenges, Samsung has been making strides in winning approval from Nvidia to supply it with HBM3E memory, which could potentially lead to a long-term partnership and additional customers.

The delay in Nvidia's AI chip supply has had a significant impact on Samsung's earnings, with the company's chip division reporting an operating profit of Won3.9tn ($2.8bn) in the third quarter, much lower than analyst estimates and behind its South Korean rival SK Hynix. The slowdown in Samsung's chip division has been attributed to delays in advanced chip sales and increased competition from Chinese firms supplying traditional chips. In response to these challenges, Samsung has been prioritizing top-quality chip production and making progress in winning approval from Nvidia to supply it with HBM3E memory.
Samsung's chip division is expected to face a decline in sales of high-end chips, as Nvidia's delays in mass production of its next-generation AI accelerators may lead customers like Microsoft and Google to look for alternatives. This could result in a decrease in Samsung's revenue from HBM3 and HBM3E chip sales. Additionally, the delay in Nvidia's AI chip supply could lead to increased competition in the AI chip market, with other companies like AMD stepping in to fill the gap. This could result in lower profit margins for Samsung, as it may need to compete on price to maintain market share.
Despite these challenges, Samsung is actively working to mitigate the impact of the Nvidia AI chip supply delay on its earnings. The company has made progress in the qualification test process with a major customer and expects improved sales of HBM3E memory chips in the fourth quarter. Samsung is also planning to expand sales to multiple customers, which could help diversify its revenue streams and reduce dependence on a single customer. Additionally, Samsung is focusing on sales of AI-optimized, high-bandwidth memory products to offset slowing demand for traditional chips.

In conclusion, the delay in Nvidia's AI chip supply is expected to impact Samsung's revenue and profit margins in Q4, as the company faces a decline in sales of high-end chips, missed opportunities, increased competition, and potential loss of customers. However, Samsung is actively working to mitigate these risks by prioritizing top-quality chip production, expanding sales to multiple customers, and focusing on AI-optimized, high-bandwidth memory products. As Samsung continues to navigate the challenges in the AI chip market, investors will be closely watching the company's Q4 earnings to gauge the impact of the Nvidia AI chip supply delay on its financial performance.