Samsung’s bottomline is feeling the effects of the US’ decision to limit China’s access to advanced AI technology. The company relies on its exports to China for a significant portion of its chip revenue, and is now bracing for a downturn in demand for the first quarter of 2025.
President Donald Trump’s administration has always had an abrasive relationship with China. The president has consistently advocated for imposing tariffs and export restrictions on China through his first and now second term. He also recalls trade imbalances and his intentions to protect American industries.
Trump’s efforts to limit exports to China have mainly been in the technology and manufacturing sectors.
Most recently, the United States launched its third big crackdown targeting China’s semiconductor industry, curbing its exports to 140 companies. One of the restrictions placed by the United States was on high bandwidth memory used in AI chips that correspond with the technology made by South Korea’s Samsung, SK Hynix and US-based Micron technology known as HBM 2.
Samsung facing substantial losses in the AI market
Reuters reported back in December that Samsung would be the most affected by the export restrictions imposed by the United States government, and now, the company is bracing up for a 20% loss with expectations of a decline in the demand for its HBM chips.
The restriction aims to curb China’s access to advanced artificial intelligence technologies and military applications. Samsung is disproportionately affected because it is highly active in both industries and has extensive dealings with Chinese customers.
However, Samsung is already looking ahead. The South Korean technology maker is already considering releasing the enhanced version of its HBM3E chips in March. It expects the new product to boost demand after weathering the storm of the Q1 2025 sales decline.
Samsung also reshuffled leadership within its chip division. The company appointed Jun Young-hyun as the head of its memory chip business and co-chief executive and promoted Han Jin-man to lead the foundry unit.
These changes are expected to help the AI chip market become more competitive and address investor concerns about its technological edge.
Samsung competitors gain an edge
While Samsung projects drawbacks, competitors like SK Hynix have reported strong performances, especially in supplying HBM chips to major clients such as Nvidia.
For the first time, SK Hynix overtook Samsung in terms of quarterly profit in the fourth quarter of 2024. Samsung reported an operating profit of 2.9 trillion South Korean won ($1.995 billion) in the October-December quarter, which is 26% less than the previous quarter.
“Samsung has lost its leadership in HBMs, and it seems like even in commodity memory, they are more exposed to Chinese competition,” said Sanjeev Rana, head of Korea equity research at CLSA.
“Hynix has been more resilient because they have this big portion of revenue from HBM demand, which is really good,” he added. Sanjeev also mentioned that China’s production of commodity memory has been growing and could increase in the coming months.
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Source: https://www.cryptopolitan.com/samsung-could-lose-ai-chip-sales-q1-us-china/