Samsung flags chip slowdown as revenue drops sharply from earlier quarter

Samsung Electronics on Friday reported that its working revenue dropped sharply from the earlier three months because it ramps up R&D spending, whereas flagging a slowdown in its chips enterprise.

The South Korean firm posted better-than-expected fourth-quarter income, although its working revenue missed expectations.

Listed here are Samsung’s fourth-quarter outcomes in contrast with LSEG SmartEstimate, which is weighted towards forecasts from analysts who’re extra constantly correct:

• Income: 75.8 trillion Korean received ($52.2 billion) vs. KRW 75.4 trillion
• Working revenue: KRW 6.5 trillion vs. KRW 6.8 trillion

Income rose about 12% from final 12 months, whereas working revenue grew about 130%, 12 months on 12 months. Nevertheless, working revenue fell practically 30%, and income slipped by over 4%, quarter on quarter, amid comfortable market circumstances and a rise in firm expenditures.

Fourth-quarter income beat Samsung’s personal steerage of KRW 75 trillion, whereas working revenue got here in keeping with the corporate’s forecast.

Samsung is a number one producer of reminiscence chips, that are utilized in gadgets corresponding to laptops and servers, and can be the world’s second-largest participant within the smartphone market.

“Though fourth quarter income and working revenue decreased on a quarter-on-quarter (QoQ) foundation, annual income reached the second-highest on document, surpassed solely in 2022,” Samsung stated in its assertion.

For the total 12 months, Samsung reported KRW 300.9 trillion in income and KRW 32.7 trillion in working revenue. In 2023, the corporate posted an annual income of KRW 258.94 trillion and an working revenue of KRW 6.57 trillion.

For the present quarter, Samsung stated that earnings is likely to be restricted as a result of weak point in its semiconductor enterprise however that it might pursue progress by means of AI smartphones and different premium gadgets. 

“For 2025 as a complete, the Firm plans to boost technological and product benefits in AI, proceed to satisfy future demand for high-value-added merchandise and drive gross sales progress in premium segments,” it added.

Samsung shares fell 2.2% in South Korea on Friday morning, whereas SK Hynix inventory fell over 11% as South Korean markets resumed buying and selling after a four-day break. Asian tech majors have confronted stress from the most recent synthetic intelligence mannequin from China’s DeepSeek that threatens to upend the U.S.-led AI ecosystem.

Samsung Electronics’ chip enterprise posted an working revenue of KRW 2.9 trillion within the fourth quarter, down over 25% from the three months ending in October, whereas its annual numbers got here in beneath that of SK Hynix.

This was regardless of Samsung’s reminiscence enterprise attaining a record-high fourth-quarter income of 30.1 trillion helped by demand for its superior reminiscence merchandise used for AI purposes. 

“[O]perating revenue decreased barely in comparison with the earlier quarter because of elevated R&D bills to safe future know-how management, in addition to the preliminary ramp-up prices to safe manufacturing capability for cutting-edge nodes,” Samsung stated. 

Samsung and SK Hynix each present DRAM, or dynamic random entry reminiscence, merchandise — a kind of semiconductor reminiscence wanted for knowledge processing. 

Nevertheless, SK Hynix has left Samsung behind in HBM, or excessive bandwidth reminiscence, a kind of DRAM, through which chips are vertically stacked to avoid wasting house and cut back energy consumption. HBM merchandise have seen booming demand as a result of there use in high-performance computing purposes corresponding to AI.

“They’ve misplaced share within the excessive bandwidth DRAM enterprise… that is the place SK Hynix has actually leapfrogged forward of Samsung,” Eric Ross, analyst at Cascend Securities, instructed CNBC’s “Squawk Field Asia,” on Friday.

He famous that U.S. DRAM maker Micron has additionally gained floor on the corporate.

“Samsung is form of within the fallacious items of the DRAM market proper now as a result of they missed the excessive bandwidth piece, they usually actually need to compensate for that,” he stated, including that the PC and smartphone DRAM markets are beneath worth stress.

In line with Samsung, its reminiscence enterprise is chopping down legacy merchandise to raised align with market demand and growing its proportion of excessive value-added merchandise, corresponding to HBM. 

“In 2025, total reminiscence market demand is predicted to get well from the second quarter,” Samsung stated, warning that its earnings are anticipated to stay weak within the present quarter.  

Samsung’s cellular expertise and networks companies, tasked with creating and promoting smartphones, tablets, wearables and different gadgets, reported a quarter-over-quarter lower in gross sales and revenue.

Samsung stated the efficiency was partially as a result of fading results of recent flagship smartphone mannequin launches.

The phase noticed a consolidated income of KRW 25.8 trillion and an working revenue of KRW 2.1 trillion within the fourth quarter.

“Nevertheless, on a full-year foundation, flagship gross sales noticed strong progress on the again of double-digit progress of the Galaxy S24 collection that includes Galaxy AI, with tablets and wearables additionally growing in each worth and shipments,” Samsung stated. 

Within the present quarter, Samsung plans to drive gross sales progress with new flagship fashions, significantly its newly launched Galaxy S25 collection and can proceed to push into the AI smartphone market.

“What Samsung is doing, and has executed rather well in the previous couple of years, is it is actually targeted extra on worth and its flagship gadgets,” Nabila Popal, senior director with IDC’s Knowledge & Analytics crew, instructed CNBC’s “Squawk Field Asia” on Friday.

Provided that focus, Samsung’s share of the premium market has inched nearer to Apple’s, the chief within the premium smartphone phase, she added.