By Hyunjoo Jin

SEOUL (Reuters) – Samsung Electronics, the world’s top memory chip maker, is anticipated to forecast on Wednesday that its profit growth continued to slow in the fourth quarter due to difficulties in meeting the strong demand for AI chips from Nvidia.

Slowing Profit Growth Continues

Samsung, also the world’s largest smartphone and TV manufacturer, is expected to estimate its operating profit rose to 8.2 trillion won ($5.6 billion) in the quarter ended December, up from a low base of 2.8 trillion won a year earlier but down from 9.18 trillion won in the preceding quarter.

A multitude of analysts have reduced their earnings estimates in recent weeks, with some anticipating operating profit to fall below 8 trillion won. This downward trend is attributed to several factors, including:

• Nvidia’s strong demand for AI chips: Samsung has struggled to meet this demand, leading to delays and a subsequent impact on its earnings.
• Lackluster demand for traditional chips: The market for mobile phone and PC chips has been sluggish, putting pressure on chip prices.
• Rising output from Chinese rivals: Increased production from Chinese competitors has also contributed to the downward trend in chip prices.

Analysts’ Expectations

A range of analysts have reduced their earnings estimates for Samsung’s fourth-quarter operating profit. Some notable predictions include:

• 8 trillion won or lower: This is the estimated range for operating profit, down from 9.18 trillion won in the previous quarter.
• 10% loss for the wider market: In contrast, the overall market experienced a modest decline of only 10% last year.

Cross-Town Rival SK Hynix Expected to Post Record Earnings

SK Hynix, Samsung’s cross-town rival and major supplier of advanced AI memory chips to Nvidia, is anticipated to report record earnings for the fourth quarter. This is attributed to its strong supply chain and efficient operations.

Prices Under Pressure

Chip prices have been under pressure due to several factors:

• Lackluster demand: The market for mobile phone and PC chips has been sluggish, leading to a decline in chip prices.
• Rising output from Chinese rivals: Increased production from Chinese competitors has also contributed to the downward trend in chip prices.

DDR4 DRAM Chips Prices Decline

Prices of DDR4 DRAM chips used in personal computers fell as much as 13% in the fourth quarter and are expected to decline another 15% in the current quarter, according to estimates from researcher TrendForce. This offset the positive impact of the weaker local currency that boosts repatriated earnings from overseas.

Weaker Local Currency Boosts Repatriated Earnings

The South Korean won dropped to its weakest level in 15 years in December after President Yoon Suk Yeol’s martial law decree triggered political turmoil and U.S. President-elect Donald Trump advocated higher tariffs on imports. This led to a boost in repatriated earnings from overseas, but the impact was offset by the decline in chip prices.

Losses Expected in Logic Chip Business

Samsung’s business of making logic chips designed by customers like Qualcomm is expected to continue to make losses, eroding its chip earnings.

Announcement and Detailed Results

Samsung will announce estimates on fourth-quarter revenue and operating profit on Wednesday, with a plan to release detailed results including a breakdown of earnings for each of its businesses in late January.

($1 = 1,464.6300 won)

(Reporting by Hyunjoo Jin; Editing by Anne Marie Roantree and Jamie Freed)