Samsung Warns of Slow Sales in AI Chips Due to U.S. Export Restrictions
By Joyce Lee and Hyunjoo Jin
SEOUL – South Korean tech giant Samsung Electronics issued a cautionary note on Friday regarding the sales of its advanced artificial intelligence (AI) chips in the current quarter. The company attributes the expected slowdown to recent U.S. export restrictions affecting shipments to China, as well as the anticipated launch of enhanced versions of its high-end chips.
The Impact of U.S. Export Restrictions
Advanced AI chips have been a standout performer in Samsung’s otherwise weak memory chip market. However, the U.S. government imposed new sanctions on China’s semiconductor industry in December, which included restricting the export of high-bandwidth memory (HBM) chips. This move significantly affects Samsung, as Chinese customers make up about 20% of the company’s HBM sales.
“There will be some temporary restrictions in our HBM chip sales in the first quarter,” said Kim Jae-june, executive vice president of Samsung’s memory business, during an earnings call. “These constraints will impact our ability to meet demand not just due to the U.S. restrictions but also because of the shift towards better chips by major clients,” he added.
Rival Advantage: SK Hynix and Nvidia
Rival SK Hynix has an upper hand in the AI chip market as the primary supplier of high-bandwidth memory (HBM) chips to Nvidia for its graphics processing units (GPUs). In contrast, Samsung has faced challenges meeting Nvidia’s exacting requirements.
Nvidia CEO Jensen Huang acknowledged that Samsung needs to redesign its HBM chips to continue supplying them to Nvidia, according to a report in the Korea JoongAng Daily.
Forecast for Q1 and Beyond
Samsung’s fourth-quarter operating profit was announced at 6.5 trillion won ($4.48 billion), a 29% decline from the third quarter. The company anticipates limited growth in the first quarter due to weak memory chip sales and subdued demand for smartphones and personal computers.
Samsung projected that the mobile phone market would slow down this year, citing uncertainties brought about by U.S. policy changes and inflation.
Mobile Business Setbacks
The tech giant unveiled its latest flagship Galaxy phone, featuring AI capabilities, last week. Despite this launch, Samsung plans to continue using Qualcomm’s application processors for the entire Galaxy S25 lineup, a departure from its typical strategy of utilizing its own Exynos processors. This decision is expected to diminish Samsung’s logic chip design business for the current quarter.
Shares in Samsung dropped 2.8% following the holiday break, compared to a more modest 0.75% drop in the wider market. Meanwhile, SK Hynix’s stock took a hit, falling 9.6%, due to concerns about competition from China’s AI model, DeepSeek.
Recovery and Future Outlook
Samsung remains optimistic about a rebound in overall memory chip demand starting from the second quarter. The company’s ability to supply high volumes of advanced 12-layer HBM3E chips to Nvidia will likely determine Samsung’s success in 2025, according to analysts.
In a notable development, SK Hynix and Taiwan Semiconductor Manufacturing Company (TSMC) recently reported record quarterly profits, driven by the AI boom. SK Hynix outperformed Samsung for the first time during this period.
Chip Market Dynamics
Samsung’s fourth-quarter operating profit reflected a 130% increase from a low base set the previous year, when the memory chip industry was going through a severe downturn. The profit in Samsung’s mobile phone business decreased 22% to 2.1 trillion won compared to the same period last year.
The chip division posted an operating profit of 2.9 trillion won in the fourth quarter, a figure that is less than half the profit recorded by SK Hynix.
Investment Plans and Market Position
Samsung has not yet finalized its investment plans for 2025, but it remains committed to maintaining a similar level of memory chip capital spending as last year.
Operating profit in Samsung’s mobile phone business fell 22% to 2.1 trillion won in the fourth quarter from a year earlier. Its chip division swung to an operating profit of 2.9 trillion won, but this was less than half the 8.08 trillion won profit reported by smaller peer SK Hynix during the same period.
Conclusion
As Samsung navigates through the challenges of U.S. export restrictions and the competition from rival suppliers, the company’s ability to innovate and adapt will be crucial for future success. The expected launch of enhanced AI chips in March and the anticipated recovery of the memory chip market offer potential turning points for the company.
Stay tuned for further developments and analysis on Samsung’s ongoing journey in the semiconductor industry.
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