Samsung falls short of expectations as chipmaker fails to reap AI benefits

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Samsung Electronics reported an operating profit of Won3.9tn ($2.8bn) from its chip division in the third quarter, falling far short of analyst estimates and behind its South Korean rival SK Hynix, as the world’s biggest memory-chip maker failed to take full advantage of the artificial intelligence boom.

Operating profit in the July-to-September quarter was much lower than the Won6.7tn estimate of analysts polled by Bloomberg and the Won6.45tn profit reported in the preceding quarter.

Chip earnings were also much smaller than those of domestic rival SK Hynix, which reported a Won7tn operating profit last week, highlighting the widening gap in their competitiveness in advanced memory chips. Samsung this month issued a rare public apology for its weak performance as it has struggled to catch up with SK Hynix in high bandwidth memory chips used in AI hardware.

Samsung has not managed to pass industry leader Nvidia’s qualification tests for advanced HBM chips, but the company said on Thursday it had made “meaningful progress” in its efforts to win Nvidia’s approval and expected HBM chip sales to increase in the fourth quarter.

Samsung’s share price has fallen more than 30 per cent from its July peak on heavy foreign selling, but the shares gained 2 per cent on Thursday morning amid hopes Samsung could regain lost ground in HBM chips.

The company expects limited earnings growth in the fourth quarter due to falling demand in mobile and computer Dram chips and a rising supply of legacy chips in China.

Analysts have expressed scepticism about Samsung’s business prospects in HBM and expect a major shake-up among its chip executives next month.

“Samsung remains optimistic about the HBM outlook, but it won’t be easy to pass the qualification test and increase HBM yields,” said an analyst at a foreign brokerage, referring to Samsung being able to produce more of the chips without flaws.

“It is too early to talk about Samsung regaining HBM competitiveness,” the analyst added. “Some of its key memory executives will likely be replaced for the weak performance.”