Samsung Electronics faces significant challenges in its fourth-quarter performance, with preliminary earnings falling short of market expectations. The company reported an operating profit of 6.5 trillion won ($4.47 billion), substantially below analysts' consensus of 7.97 trillion won. Despite this shortfall, the result represents a 131% increase from the same period last year, highlighting the complex landscape of the semiconductor industry.

The primary factors contributing to Samsung's earnings miss include weak demand for conventional memory chips and difficulties in supplying high-bandwidth memory (HBM) chips to key clients like Nvidia. Samsung's struggle to compete with rival SK Hynix in producing advanced AI accelerator memory chips has significantly impacted its financial performance. The company has been grappling with rising research and development costs, manufacturing capacity expansion, and lower demand for memory chips used in personal computers and smartphones.

At the Consumer Electronics Show (CES) 2025, Samsung's CEO Han Jong-hee attempted to shift focus towards the company's AI initiatives, positioning artificial intelligence as a potential momentum driver for earnings recovery. The company showcased personalized AI experiences and emphasized its vision for seamlessly connected smart home technologies. However, the earnings guidance suggests deeper challenges, with Samsung's Device Solutions division facing particular scrutiny. Notably, Nvidia's CEO Jensen Huang indicated that Samsung must "engineer a new design" to successfully supply HBM chips.

The broader context reveals significant market challenges for Samsung. The company's stock fell 32% in 2024, underperforming the semiconductor industry average. While Samsung anticipates full-year 2024 operating profit of 32.73 trillion won, a substantial increase from 2023, the quarterly performance raises concerns about its competitiveness. Analysts point to softening demand across non-memory chip sectors, stagnant mobile device sales, and intense market competition as key underlying issues. Despite these challenges, some market experts believe the chip demand may have bottomed out, offering a potential path to recovery.