By News Zier Editorial Team | Reviewed and approved by Editor-in-Chief to ensure accuracy and integrity.
Key Takeaways:
- Samsung Electronics semiconductor division posted lower-than-expected Q4 2024 profits due to increasing costs and fierce competition in AI memory technology.
- The company lags behind SK Hynix in the high-bandwidth memory (HBM) market, critical for AI processing power.
- Samsung’s foundry business faces continued losses, struggling to compete with TSMC in contract chip manufacturing.
- Despite immediate setbacks, Samsung remains confident that AI-driven demand will fuel future semiconductor growth.
Samsung’s Chip Profit Misses Expectations
Samsung Electronics reported a weaker-than-expected financial performance in Q4 2024, primarily due to mounting costs in AI chip production. The semiconductor division, historically Samsung’s most profitable sector, faced challenges in securing a dominant position in the booming high-bandwidth memory (HBM) market.
Competition from SK Hynix, the leader in HBM technology, has intensified as Nvidia, the world’s top AI chip designer, has favoured Hynix’s advanced AI memory products over Samsung’s offerings. This has impacted Samsung’s ability to capitalize on the surging demand for AI-driven semiconductors.
Challenges in AI Memory Development
The rise of AI applications has spurred demand for HBM chips, but Samsung’s efforts to catch up with SK Hynix have been hampered by multiple setbacks:
- HBM3E Delays: Samsung has struggled to roll out its next-generation HBM3E memory, while SK Hynix has already secured major contracts with AI firms.
- Manufacturing Hurdles: The company is facing production yield issues, slowing down its ability to mass-produce cutting-edge AI memory.
- Loss of Nvidia Contracts: Nvidia, a key customer, has increasingly relied on SK Hynix and Micron, diminishing Samsung’s share of the AI memory supply chain.
Despite these setbacks, Samsung remains committed to improving its HBM technology and expanding its memory production capacity.
Foundry Business Struggles Against TSMC
Samsung’s foundry division, responsible for manufacturing chips for third-party clients, posted operating losses in Q4 2024. The company has struggled to gain ground against Taiwan Semiconductor Manufacturing Co. (TSMC), which holds a dominant position in contract chipmaking.
- TSMC commands over 60% of the global foundry market, leaving Samsung in a distant second place.
- Samsung’s 3nm chip production has encountered delays, allowing TSMC to secure major clients like Apple, AMD, and Qualcomm.
- R&D and operational costs continue to rise, pressuring Samsung’s profitability in the foundry segment.
Samsung plans to enhance its chip fabrication technology and expand foundry partnerships to counter TSMC’s lead.
Long-Term Growth Outlook
Despite near-term losses, Samsung remains confident about long-term semiconductor growth. The company is focusing on:
- Scaling up AI chip production to better compete in the AI memory space.
- Increasing capital investments in semiconductor R&D to improve HBM efficiency and production.
- Expanding foundry partnerships to attract more clients and reduce reliance on its consumer electronics business.
Market analysts believe that if Samsung can overcome its current production and competitive challenges, it could emerge as a major player in the next wave of AI-driven semiconductor expansion.