Samsung Electronics Co. has issued a rare apology to investors after disappointing financial results, acknowledging that the memory chip giant is facing a potential crisis. The company, once a dominant force in the industry, admitted to struggles that have caused it to lose the plot.
Jun Young-hyun, the newly appointed head of Samsung's semiconductor division, pledged to overhaul the organisation. In a candid statement, he took responsibility for the company's struggles, highlighted by worse-than-expected revenue and profit numbers. Samsung also revealed delays in delivering a crucial type of chip used with Nvidia processors for AI training, allowing rival SK Hynix Inc. to take the lead in the high-bandwidth memory (HBM) market.
In addition to falling behind SK Hynix, Samsung also made little headway in competing with Taiwan Semiconductor Manufacturing Co. (TSMC) in outsourced chip production. The company warned of “inventory adjustments” by unspecified customers and increased competition from Chinese memory chipmakers. On Tuesday, Samsung's shares dropped as much as 1.8%, marking their lowest point since March 2023. The stock is down more than 20% this year.
“These are testing times,” Jun said, adding that Samsung’s leadership is fully accountable for the company's current difficulties. “We have caused concerns about our technical competitiveness, with some talking about the crisis facing Samsung.”
The poor performance is particularly disappointing given Samsung's historic market dominance and the current surge in demand for AI hardware. This surge has benefitted competitors like SK Hynix and Micron Technology, with the latter reporting a stronger-than-expected boost in revenue from AI gear.
Jun emphasized the need for fundamental changes at Samsung, echoing previous calls for organisational reform. The company has begun laying off workers in Southeast Asia, Australia, and New Zealand as part of plans to cut thousands of jobs globally, Bloomberg News reported.
Samsung reported a preliminary operating profit of 9.1 trillion won ($6.8 billion) for the September quarter, which fell short of expectations, partly due to performance bonuses. Revenue also came in below forecasts at 79 trillion won. A full financial report is expected on October 31.
“Markets are about ‘show me the money,’” said Sanjeev Rana, an analyst at CLSA Securities Korea, commenting on Jun’s remarks. “The share price will rise when there are tangible signs of improvement," Bloomberg quoted him as saying.
For now, Samsung is playing catch-up to SK Hynix, which has taken the lead in producing HBM chips paired with Nvidia’s AI accelerators. Samsung’s priority is to secure certification for its advanced HBM3E chips, which was expected last quarter.
The delay has weighed on Samsung’s stock, which has underperformed compared to other AI-related stocks and the benchmark Kospi index. Analysts have recently cut their price targets for the company. Macquarie, in a report on September 25, downgraded Samsung from "outperform" to "neutral" and slashed its target price from 125,000 won to 64,000 won.
“At Samsung, we have a deep and proven history of overcoming difficulties and turning them into opportunities,” Jun said. “Rather than relying on short-term solutions, we will focus on reinforcing our long-term competitiveness.”
Over 1,100 workers from Samsung’s Sriperumbudur plant have been on strike, demanding recognition of the Samsung India Workers' Union, supported by the Centre of Indian Trade Unions (CITU). In response to the ongoing situation, Tamil Nadu Industries Minister TRB Rajaa has held talks with the company's management to end the stir.
