Samsung Electronics Co. has issued a rare apology to its investors, acknowledging significant challenges facing the company and its semiconductor division. The once-dominant leader in the semiconductor industry is grappling with disappointing financial results that have raised concerns about its future.
Jun Young-hyun, the newly appointed head of Samsung’s semiconductor division, openly took responsibility for the company’s struggles, which include worse-than-expected revenue and profit figures. The company has also faced delays in delivering critical chips used with Nvidia processors for AI training, allowing competitors like SK Hynix Inc. to gain an edge in the high-bandwidth memory (HBM) market.
Samsung’s stock took a hit, dropping as much as 1.8% on Tuesday to its lowest point since March 2023, contributing to a decline of over 20% for the year. The company has warned of “inventory adjustments” from unspecified customers and increasing competition from Chinese memory chip manufacturers.
“These are testing times,” Jun stated, acknowledging that the leadership team is fully accountable for the current difficulties. “We have caused concerns about our technical competitiveness, with some talking about the crisis facing Samsung.”
This downturn is particularly disappointing given the ongoing surge in demand for AI hardware, a trend that has benefitted competitors like SK Hynix and Micron Technology. Micron has reported stronger-than-expected revenue driven by AI-related sales.
Jun emphasized the need for fundamental changes within the organization and echoed previous calls for reform. As part of this effort, Samsung has begun laying off employees in Southeast Asia, Australia, and New Zealand, with plans to cut thousands of jobs globally. The company recently reported a preliminary operating profit of 9.1 trillion won ($6.8 billion) for the September quarter, falling short of expectations, alongside revenue of 79 trillion won, which also missed forecasts. A full financial report is anticipated on October 31.
Analyst Insights
“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,” he added.
Currently, Samsung is playing catch-up to SK Hynix, which has taken the lead in producing HBM chips that complement Nvidia’s AI accelerators. Securing certification for its advanced HBM3E chips is a top priority for Samsung, but delays have hindered its stock performance compared to other AI-related stocks and the benchmark Kospi index. Analysts have recently downgraded their price targets for the company, with Macquarie reducing its recommendation from “outperform” to “neutral” and slashing the 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.”
