Samsung Issues Apology for Underwhelming Profits Amid Challenges in AI Chip Sector
Picture Credits: IEEE Spectrum
By Pavethran Batmanathen
On Tuesday, Samsung Electronics projected a nearly four-fold increase in its third-quarter operating profit; however, the figure fell short of analysts’ expectations, leading to a rare public apology from the company for lagging behind its competitors in the rapidly growing AI chip sector.
The world’s largest manufacturer of memory chips, smartphones, and televisions estimated its operating profit for the three months ending September 30 at 9.1 trillion won (approximately $6.78 billion). This figure was below the 10.3 trillion won forecasted by LSEG SmartEstimate. In comparison, the operating profit was 2.43 trillion won during the same period last year and 10.44 trillion won in the previous quarter.
Following the earnings forecast, Samsung’s share price, which has already seen a decline of more than 20% this year, dropped by 1.2%.
For three decades, Samsung has held the title of the world’s largest memory chipmaker, but it now faces increasing competition in both traditional and advanced chip markets. High-margin chips used in AI servers are propelling a recovery in the chip industry after a downturn experienced last year post-pandemic. Nonetheless, Samsung has fallen behind its rival SK Hynix in supplying high-bandwidth memory (HBM) chips to AI powerhouse Nvidia.
Young Hyun Jun, Vice Chairman of Samsung’s Device Solutions Division, acknowledged the concerns regarding the company’s technical competitiveness. He noted that some observers have described the situation as a “crisis” for Samsung. “These are testing times,” he stated, while promising to turn these challenges into opportunities and to concentrate on improving the company’s long-term technological competitiveness.
In addition to these challenges, Samsung disclosed that sales of its advanced HBM3E chips to a significant customer have been delayed, though it did not provide further details on the matter.
The earnings in Samsung’s memory chip division have decreased as Chinese chip competitors have ramped up supplies of “legacy” products. Furthermore, some mobile customers have adjusted their inventories, which countered the robust demand for high-bandwidth memory (HBM) and other chips used in server applications, according to the company.
Analysts also pointed out that demand for commodity chips, which are essential for PCs and smartphones—areas where Samsung relies more heavily compared to its rivals—remains weak.
In May, Samsung took decisive action by replacing the head of its semiconductor division, appointing Jun to lead the team as part of its efforts to navigate what it refers to as a “chip crisis.”
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