Samsung faces slowdown in AI chip sales

Samsung Electronics has warned of weak sales for its AI chips in the first quarter, citing US export restrictions on high-bandwidth memory (HBM) chips to China. These restrictions, combined with the company’s struggle to meet Nvidia’s HBM chip requirements, are expected to impact demand. Samsung’s reliance on Chinese customers for about 20% of its HBM sales makes it particularly vulnerable. Despite this, the company plans to release upgraded HBM3E products in March to address shifting market demands.

The company also reported a 29% drop in operating profit for the fourth quarter, totalling 6.5 trillion won ($4.48 billion). Samsung expects limited earnings growth in the first quarter, driven by sluggish demand in the memory chip market, particularly for smartphones and personal computers. In addition, delays in GPU production, mainly due to strong demand and engineering challenges, have affected memory chip requirements for servers in data centres.

Samsung’s mobile phone division also faced challenges, with a 22% drop in operating profit in the fourth quarter. The company’s decision to use Qualcomm’s application processors instead of its own Exynos chips for the Galaxy S25 lineup has weakened its position in the mobile chip market. Despite these hurdles, Samsung anticipates a recovery in the memory market by the second quarter, depending on its ability to supply Nvidia with advanced HBM3E chips.

While competitors SK Hynix and TSMC have benefitted from the AI boom, with record profits, Samsung’s performance in the AI chip market has fallen behind. The company’s future performance will heavily depend on its ability to secure a stronger foothold in the rapidly growing AI sector.