Samsung Electronics reports robust quarterly profits but faces hurdles meeting demand for AI chips, raising questions about its future in the competitive semiconductor market.
Samsung Electronics announced on Friday a remarkable surge in its operating profits for the fourth quarter of 2024, reaching a staggering 129.85 percent year-on-year growth. Despite this impressive feat, the company's profits fell short of the previous quarter's performance, primarily due to challenges in meeting the surging demand for chips essential in powering artificial intelligence (AI) servers.
This announcement follows Samsung's acknowledgment in October of a 'crisis' within its memory-chip business, raising concerns about its technological competitiveness and future prospects. \Operating profit for the October to December period amounted to 6.5 trillion won ($4.5 billion), a significant jump from 2.82 trillion won recorded a year earlier. While sales climbed 11.8 percent to 75.78 trillion won, and net income rose 22.2 percent to 7.75 trillion won, Samsung attributed the decline in Q4 operating profit compared to the previous quarter (9.18 trillion won) to 'soft market conditions, especially for IT products, and an increase in expenditures, including R&D.' Furthermore, the company anticipates 'limited earnings improvement' in the first quarter of 2025 due to persistent weakness in the semiconductor business.\The global semiconductor landscape is witnessing a fierce competition, particularly in the burgeoning field of AI. US tech giant Nvidia, a leader in AI semiconductors, has relied heavily on SK Hynix, Samsung's South Korean rival, for supplying high-bandwidth memory (HBM) chips crucial for its AI graphics processing units (GPUs). Samsung, however, has struggled to meet Nvidia's demanding requirements, facing concerns regarding its technological leadership in the semiconductor market, which has reportedly been eroded in recent years. Industry analysts point to Samsung's 'conservative' approach to cost optimization relative to meeting customer demands as a key contributing factor to its challenges. Adding to Samsung's woes, the company has faced competition from Micron in the DRAM market for AI applications in smartphones and PCs, particularly in its latest Galaxy S25 flagships. However, recent reports suggest that Samsung has secured approval to supply a version of its fifth-generation HBM chips to Nvidia, offering a glimmer of hope amidst the turbulent market conditions.
SAMSUNG ELECTRONICS PROFITS AI CHIPS SEMICONDUCTORS NVIDIA SK HYUNX COMPETITIVE MARKET
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