World’s top memory chipmaker falls behind runner-up SK hynix in chip earnings amid AI chip struggles

Samsung Electronics' headquarters in Seocho-gu, Seoul on Friday (Yonhap)
Samsung Electronics' headquarters in Seocho-gu, Seoul on Friday (Yonhap)

Samsung Electronics, the world’s largest memory chipmaker, reported Friday weaker-than-expected chip earnings in 2024 despite record sales, as it struggled to keep up in the AI chip race amid plunging legacy product prices.

The company said it achieved all-time high semiconductor sales of 111.1 trillion won ($76.4 billion) in 2024, but the operating profit stood at 15.1 trillion won, falling short of market expectations and coming in behind its smaller rival SK hynix, which posted 23.4 trillion won in the same period.

Overall, with its business spanning smartphones and TVs to semiconductors, Samsung logged sales of 300.9 trillion won in 2024, with operating profit standing at 32.7 trillion won. The annual revenue was the second highest, trailing only its record in 2022.

“The management and all the employees are very aware of the challenges that the company is facing, and we are fully committed to overcoming the current difficulties,” Park Soon-cheol, the chief financial officer and executive vice president said, making his first and rare appearance during earnings call on Thursday.

“Samsung’s business portfolio spans a diverse range of industries that operate within different business cycles and market dynamics, which cause fluctuations in our company’s performance. We are confident that this diversity along with the progress being made in our businesses will drive gradual recovery,” Park said, adding that he is committed to reinforcing the trust of shareholders and investors.

The chipmaker said it will start delivery of the enhanced model of HBM3E from around the end of the first quarter of this year. HBM3E is the fifth-generation high bandwidth memory chip, a stacked DRAM chip used as a key component for enhancing AI processes for graphic processing units.

“We started mass producing 8-layer and 12-layer HBM3E chips and expanded supply to multiple GPU makers and data center clients in the fourth quarter of last year. So sales of HBM3E surpassed that of HBM3,” Kim Jae-june, the executive vice president in charge of the memory chip business said.

The chip giant forecasts there may be a temporary gap in demand due to the impact of the advanced chip export controls recently announced by the US government and the fact that major customers are shifting their existing demand toward its improved HBM3E product. The company has reportedly come up with the enhanced HBM3E model upon request of Nvidia, the world’s top GPU maker.

The company said it is also preparing to start mass production of the next-generation HBM4 using a leading-edge 1c-nanometer process node in the second half of this year. Ramping up production of the upcoming models, Samsung said it aims to double its total HBM bit supply in 2025, compared to last year.

Regarding 16-layer HBM3E products, the company anticipated there would not be any commercial demand, but it has produced samples and delivered them to key customers for technology validation.

As legacy chips such as DDR4 and LPDDR4 are becoming less profitable amid falling prices, Samsung will cut the sales proportion to a single digit. Previously the chips took about 30 percent of sales, according to the memory business chief.

“As uncertainties in demand continue, we are continuing to shift our business portfolio focusing on high-value-added products. We are optimizing the line operations for some legacy nodes, while accelerating to cutting-edge nodes to respond to the demand for high-performance and high-density products,” Kim said.

The chipmaker has yet to finalize its capital expenditure plan for 2025. But it said it expects to allocate a similar budget for the memory chip business as last year. Its facility investment stood at 53.6 trillion won in 2024, with 46.3 trillion won allocated to semiconductors and 4.8 trillion won to displays. The company reduced investment in its foundry business.

In its mobile device business, Samsung said it sold 224 million units of smartphones and 28 million tablet PCs in 2024. The smartphone maker said it aims for a double-digit growth rate in its flagship smartphone sales and profitability.

While the company did not use its own mobile application processor for Samsung Galaxy S25 series launched earlier this month, it plans to adopt the flagship Exynos 2500 chip in the upcoming Galaxy series expected to roll out in the second half of this year.

Regarding potential impacts of policy shifts under US President Donald Trump, who recently kicked off his second term, Samsung said it is closely monitoring the policy-making processes and assessing business impacts to come up with appropriate responses.

“We will leverage our global production capabilities, supply chain management expertise, AI-driven product edge and diverse business portfolio to navigate risks and changes brought by the Trump administration,” the company said.