Samsung Electronics’ Q4 performance last year showed consecutive negative growth for the third quarter, indicating that it has entered the ‘harsh winter’ that Morgan Stanley warned of in September of last year. What is more concerning than the performance is that NVIDIA’s HBM has been officially labeled as having a technical defect. At a press conference after the CES keynote speech on the 6th (local time), NVIDIA CEO Jensen Huang said that Samsung Electronics’ HBM will need to be redesigned. Photo = SUDO Citizen Economy
Reporter Joo-yeon Lee Approved 2025.01.08 11:26 Comments 0
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Samsung Electronics' performance in the fourth quarter of last year showed a consecutive negative growth following the third quarter, showing that it is falling into the curse of the Morgan Stanley report released in September of last year titled 'Semiconductor Winter is Coming'.
The negative growth in the immediate performance is worrisome, but it is expected that it will have an even harsher winter as it is unable to find momentum to overcome the current difficult situation due to technical issues such as the delay in the supply of HBM to Nvidia.
■Entering a full-blown harsh winter in terms of performance
Samsung Electronics announced its preliminary performance for the fourth quarter of last year on the 8th, with sales of 75 trillion won and operating profit of 6.5 trillion won, down 5% and 29% respectively from the previous quarter. The third quarter performance was 79 trillion won in sales and 9.2 trillion won in operating profit.
It also fell far short of the sales consensus (average of securities firms’ forecasts) of KRW 77.4035 trillion and operating profit of KRW 7.9705 trillion compiled by financial information company F&Guide the previous day.
Recently, securities firms sharply revised their performance forecasts downward after confirming the continued decline in the price of old semiconductors, but in the end, the fourth quarter performance did not meet the lowered market expectations.
The negative performance growth is mainly interpreted as the sluggish semiconductor and display businesses, and the operating profit of the semiconductor sector is expected to be around KRW 3.5 trillion, about 10% lower than the previous quarter.
As a result, Samsung Electronics recorded annual sales of KRW 300.8 trillion and operating profit of KRW 32.73 trillion last year, up 16% and 398% respectively from 2023, but the comparison is meaningless because 2023 was the worst year.
This is because Samsung Electronics' operating profit actually recorded a deficit of KRW 6.6 trillion in 2023, from KRW 51.6 trillion in 2021 and KRW 43.3 trillion in 2022.
■ Morgan Stanley's warning applies only to Samsung Electronics
Samsung Electronics turned from a deficit trend in 2023 to a surplus early last year, but as Morgan Stanley warned, its performance began to deteriorate starting in the third quarter, centered on semiconductors, and it is continuing to show negative growth.
In September last year, Morgan Stanley, a leading investment bank (IB) in the United States, predicted in a report titled "(Semiconductor) Winter is Coming" that the semiconductor market would worsen due to the decline in DRAM semiconductor prices and the expansion of HBM production in China. Accordingly, it mentioned Samsung Electronics and SK Hynix in Korea as the companies that would suffer the most damage, and significantly lowered their target stock prices.
At that time, Morgan Stanley lowered the target stock price of SK Hynix from 260,000 won to 120,000 won and that of Samsung Electronics from 105,000 won to 76,000 won, and as a result, the stock prices of both companies fell significantly on that day.
Over the past seven years, Morgan Stanley has released two more outlooks for the semiconductor industry. In November 2017, it released a report stating that “NAND flash prices will fall,” and had a negative outlook for Samsung Electronics’ performance. At that time, Samsung Electronics had achieved its best performance ever, exceeding 50 trillion won in annual operating profit for two consecutive years.
The second report was released in 2021, and as the report said, Samsung Electronics and SK Hynix had a terrible winter for the next two years. In 2023, both companies continued to post deficits.
However, the report from September last year is half right and half wrong. Samsung Electronics has been showing negative growth since the third quarter of last year, but SK Hynix is showing its best performance.
In the end, the harsh winter pointed out in Morgan Stanley's September 2024 report only affected Samsung Electronics.
■Nvidia CEO Jensen Huang's "HBM needs to be redesigned" label
In addition to the immediate performance, there are signs here and there that Samsung Electronics' winter will not end easily, which is raising even greater concerns.
On the 6th (local time), NVIDIA CEO Jensen Huang unveiled the $500 GeForce 'RTX50' series based on the next-generation Blackwell architecture in the keynote speech at the electronics and IT exhibition 'CES 2025' held in Las Vegas, USA, and announced that it was equipped with Micron Technology's GPDDR7.
Samsung Electronics, which is known to have an advantage over Micron, has become a 'dog chasing a chicken'. The market was greatly surprised because the prevailing speculation was that Samsung Electronics' memory chips would be installed.
As a result, Micron's stock price rose 10.45% on the same day, and rose 2.67% the next day while U.S. stocks fell overall.
In addition, regarding HBM, Jensen Huang did not mention Samsung Electronics at all during his keynote speech, showing a complete change from his friendly attitude toward Samsung Electronics in March of last year.
After the keynote speech, at a press conference, Jensen Huang gave a ceremonial answer to reporters' questions about Samsung Electronics' HBM, saying that it would be resolved over time, and then made the shocking statement, "However, Samsung Electronics' HBM will have to be redesigned." From Samsung Electronics' perspective, this statement could be considered a death sentence.
Jensen Huang visited the Samsung Electronics booth at the 'GTC 2024' event held in San Jose, California, USA in March last year, and drew much attention by leaving a handwritten 'approved' sign, raising expectations for Samsung Electronics' 5th generation high bandwidth memory (HBM3E) to be installed in Nvidia's artificial intelligence (AI) accelerator.
However, Samsung Electronics failed to keep its promise to pass the quality inspection in the first half of last year, in September, and by the end of the year, and Jensen Huang was dealt a decisive blow at this CES.
When reporters asked Jensen Huang about his plans to meet with SK Hynix Chairman Choi Tae-won that day, he responded that he planned to meet him as soon as tomorrow, showing deep trust that was different from Samsung Electronics', creating a contrasting atmosphere between the two companies.
For Jensen Huang, who is rushing to launch the next-generation AI chip, Rubin, the most pressing issue is to bring forward the development of HBM4 (6th generation) to be installed in Rubin, and he desperately needs help from SK Hynix, which is currently supplying the 5th generation HBM3E almost exclusively.
Jensen Huang is planning to bring forward Rubin, which is scheduled to be released in 2026, by six months, and announced that he signed a supply contract for HBM4 after meeting with SK Group Chairman Choi Tae-won at the SK AI Summit last November and requesting that the supply of HBM4 be brought forward by six months.
Jensen Huang, who was greatly disappointed by Samsung Electronics’ technological shortcomings, naturally had no choice but to rely on SK Hynix’s technological capabilities.
In the legacy memory sector, which had to suffer losses due to price declines, Samsung Electronics’ semiconductor division was in serious trouble after receiving a quality inspection error for AI semiconductor chips such as HBM. This is why some are pointing out that it needs to prepare for a situation where it could even be concerned about its existence.
An industry insider expressed concern, saying, “Samsung Electronics is in serious trouble not because of its immediate deterioration in performance, but because its technological shortcomings are constantly being revealed and it is unable to come up with a solution to this,” adding, “Even if you look at the past management and executive personnel changes, they are revolving door personnel, and it will not be easy to solve the problem with such a bureaucratic organization.”
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