artificial intelligence chips as well as continued losses in its contract chip manufacturing business.
It is also worth mentioning that the world’s biggest memory chip manufacturer is now in the process of a management reshuffle as a response to the sudden death of the co-CEO Han Jong-Hee in late March, as they are also due to report preliminary first-quarter earnings on Tuesday.
Samsung has also been grappling with falling chip profits since the middle of last year, as it fell behind key rival SK Hynix in supplying high-performance memory chips to AI chip leader Nvidia. This struggle in the high-end market has also left the South Korean tech giant heavily dependent on customers in China looking for less advanced products that are not subject to U.S. export restrictions.
Ryu Young-ho, a senior analyst from NH Investment & Securities, estimated that the AI chip demand from Chinese customers dropped in Q1 after front-loading in the previous quarter. He also added, “The share of HBM chips in Samsung's overall DRAM shipments may have declined slightly in the first quarter, leading to an expected decrease in DRAM profitability," referring to bandwidth memory (HBM).
Samsung also projected to report 5.2 trillion won in the January-March quarter operating profit, according to LSEG SmartEstimate. Even more so, it reported a 6.6 trillion won profit in a similar period of time, a year ago.
While Samsung is now working on a redesigned version of its most advanced HBM chips to supply key clients, a relatively high exposure to commodity chips has made its profitability more vulnerable to prices that are volatile.
It is also worth mentioning that DRAM memory chips are widely used in smartphones and PCs, fell by 25% in the first quarter of the year. The prices on NAND flash chips also fell nearly 50% during the same period of time.
Jeff Kim, the head of research from KB Securities, has stated, “Samsung could look to diversify its production base ... as part of its mid-to-long-term strategy. However, that isn't something that can be done within a year or two,”, also adding “If tariffs on consumer electronic devices, such as smartphones, persist, they will inevitably impact consumer demand.”, reported Reuters.
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