By Hyunjoo Jin and Joyce Lee
SEOUL (Reuters) -Samsung Electronics released on Wednesday a fourth-quarter operating profit estimate that missed analyst estimates by a large margin, as it lagged behind rival SK Hynix in supplying high-end chips to Nvidia.
Samsung’s earnings were dented by rising research and development costs and the ramp-up of manufacturing capacity for advanced chips, as well as by slowing demand for conventional memory chips used in PCs and mobile phones, the company said in a statement.
It did not provide any update on its progress in supplying high-bandwidth memory (HBM) chips used in artificial intelligence applications to Nvidia.
The world’s largest memory chip, smartphone and TV maker estimated an operating profit of 6.5 trillion won ($4.47 billion) for the three months ended Dec. 31, well below a 7.7 trillion won LSEG SmartEstimate.
The estimated result was 131% higher than the same period a year earlier, but down 29% from the third quarter.
Its third-quarter performance, while better than the fourth quarter, was disappointing enough for the company to make a rare apology to investors in October.
Samsung said at the time it was making progress in supplying HBM chips to Nvidia, but it has not provided any update since and the delays have continued to weigh on its earnings, according to analysts.
Nvidia CEO Jensen Huang told reporters in Las Vegas on Tuesday that Samsung has to “engineer a new design” to supply HBM chips to his company, adding that “they can do it and they are working very fast,” Korea JoongAng Daily reported.
Greg Noh, an analyst at Hyundai Motor Securities, said Samsung’s earnings outlook was worse than expected, with profit possibly eroded by one-off costs as well as disappointing chip and display results.
“I think it will take time for Samsung to supply HBMs to Nvidia,” he said.
Samsung shares fell 1% in early trading but later rebounded to rise more than 1%.
“We knew that the Q4 performance was bad, so I should say that it was reflected (in the stock price) to some extent,” said Lee Min-hee, an analyst at BNK Investment & Securities.
“There are concerns about Samsung’s major businesses continuing to lose competitiveness. But chip demand may have bottomed already,” he said, adding smartphone demand in China may gradually improve.
Shares of Samsung, South Korea’s most valuable stock, slumped 32% last year, lagging the wider market’s 10% decline.
Samsung’s cross-town rival, SK Hynix, a major supplier of advanced AI memory chips to Nvidia, is expected to post record earnings for the fourth quarter, analysts said.