Samsung Electronics Co.’s shares experienced a notable uptick following remarks by Nvidia Corp. founder Jensen Huang, who expressed confidence in Samsung’s capability to overcome the technical challenges hampering its cutting-edge memory products. This optimism provided a much-needed boost to the Korean tech giant, despite it reporting underwhelming quarterly financial results.
As the world’s largest memory chip maker, Samsung has been grappling with significant research and development costs and expenses associated with expanding its front-end manufacturing capacity. These efforts aim to bridge the technological gap with rivals SK Hynix Inc. and Micron Technology Inc., particularly in the burgeoning AI market. The company’s difficulties in securing certification from Nvidia for its latest high-bandwidth memory (HBM) products have allowed SK Hynix to capture a larger share of the critical market, which AI accelerators rely on.
Jensen Huang, speaking at the CES show in Las Vegas, emphasized that although Samsung needs to design a new solution, it is moving quickly to address the issues. His comments sparked a 3.1% rise in Samsung’s stock, signaling investor relief and renewed confidence.
Samsung’s recent financial performance reflects the broader challenges it faces. The company reported a preliminary operating profit of 6.5 trillion won ($4.5 billion) for the December quarter, falling significantly short of the 8.96 trillion won projected by analysts. Revenue totaled 75 trillion won, slightly below expectations.
The slump comes as Samsung battles weakening demand for traditional semiconductor chips used in PCs and mobile devices. Simultaneously, its consumer electronics division, encompassing smartphones, TVs, and home appliances, faces intense competition and margin pressures from Chinese manufacturers.
“Samsung is navigating one of the toughest periods in its history,” remarked Counterpoint analyst Tom Kang. “The company missed the high-bandwidth memory boom and now must demonstrate its capability to supply AI memory to new clients. They are working hard to close the gap.”
The stakes are high for Samsung, especially as tech giants like Microsoft Corp. ramp up investments in AI infrastructure. Microsoft recently announced plans to allocate $80 billion towards data center expansion, fueling optimism among AI chip suppliers, including SK Hynix. This sector saw SK Hynix post record profits in October, driven by Nvidia’s growing demand for memory in its accelerators.
Investors remain cautious, however, about Samsung’s ability to reclaim its competitive edge. Despite its vast resources, Samsung faces ongoing challenges from nimble competitors and a sluggish market for mobile chips. Additionally, the company is contending with an increasing supply of older chip models in China, exacerbating market saturation.
While Samsung navigates these hurdles, SK Hynix is implementing strategic reductions in legacy chip production and boosting capital expenditures to align with the AI infrastructure surge. The company announced plans to invest $14.6 billion in a new memory chip complex and other domestic projects, alongside a $3.87 billion commitment to an advanced packaging plant and AI research center in Indiana.
Samsung’s chip division head, Jun Young-hyun, acknowledged the company’s setbacks last year, particularly the delays in securing Nvidia certification. Jun emphasized the need for a cultural and operational overhaul, hinting at a more profound organizational transformation. These changes included significant layoffs in regions like Southeast Asia, Australia, and New Zealand, as part of a global workforce reduction strategy.
Attention now turns to Samsung’s upcoming product launches, including its latest Galaxy smartphone lineup, scheduled to be unveiled in San Jose on January 22. The new devices are expected to showcase enhanced AI capabilities, potentially signaling Samsung’s broader commitment to leveraging AI across its product ecosystem.
“Despite the disappointing fourth quarter figures, Samsung is unlikely to remain sidelined in the high-bandwidth memory market for long,” stated Adam Crisafulli of Vital Knowledge. “The company’s foundational strengths and strategic investments suggest it will eventually reassert its presence.”
