Samsung issues a rare apology to its investors after announcing disappointing financial results for the quarter. The memory chip giant acknowledged that it is facing a potential crisis, highlighting significant challenges that have hindered its performance.
Jun Young-hyun, the newly appointed head of Samsung’s semiconductor division, has committed to an organizational overhaul. In a candid statement, he accepted responsibility for the company’s poor performance, which includes worse-than-expected revenue and profit figures. Samsung revealed delays in the delivery of a crucial chip used with Nvidia processors for artificial intelligence (AI) training. These setbacks have allowed rival SK Hynix Inc. to gain a lead in the high-bandwidth memory (HBM) market.
Stock Performance Declines
In a surprising move, Samsung issues a rare apology highlighting its struggles in the semiconductor market. Samsung’s stock has taken a hit as it struggles to keep pace with SK Hynix and Taiwan Semiconductor Manufacturing Co. (TSMC) in outsourced chip production. The company has warned of “inventory adjustments” from unspecified customers and increased competition from Chinese memory chipmakers. On Tuesday, Samsung shares dropped as much as 1.8%, reaching their lowest level since March 2023. The stock is down more than 20% this year.
“These are testing times,” Jun stated, noting that Samsung’s leadership is fully accountable for the current difficulties. He acknowledged concerns about the company’s technical competitiveness, with discussions about a crisis facing Samsung becoming more common.
As competition intensifies, Samsung issues a rare apology acknowledging concerns about its technical competitiveness. Samsung’s poor performance is particularly disappointing given its historical market dominance and the surge in demand for AI hardware. This surge has benefited competitors like SK Hynix and Micron Technology, which recently reported a stronger-than-expected boost in revenue from AI gear.
Organizational Changes Underway
Jun emphasized the need for fundamental changes at Samsung, reiterating previous calls for organizational reform. The company has begun laying off employees in Southeast Asia, Australia, and New Zealand as part of a global job-cutting initiative. Reports suggest that Samsung may reduce its workforce by thousands globally.
Samsung reported a preliminary operating profit of 9.1 trillion won (approximately $6.8 billion) for the September quarter, falling short of expectations due to performance bonuses. Revenue also missed forecasts, coming in at 79 trillion won. A more detailed financial report is anticipated on October 31.
Analysts Weigh In
“Markets are about ‘show me the money,’” stated Sanjeev Rana, an analyst at CLSA Securities Korea. He commented that the share price will only rise when tangible signs of improvement are visible. Currently, Samsung is lagging behind SK Hynix, which has taken the lead in producing HBM chips paired with Nvidia’s AI accelerators. Samsung’s immediate goal is to secure certification for its advanced HBM3E chips, a process expected to have been completed last quarter.
The delay in HBM chip production has negatively impacted Samsung’s stock performance, which has underperformed compared to AI-related stocks and the benchmark Kospi index. Analysts have revised their price targets for the company downward. For instance, Macquarie recently downgraded Samsung from “outperform” to “neutral,” slashing its target price from 125,000 won to 64,000 won.
Jun stated, “At Samsung, we have a deep and proven history of overcoming difficulties and turning them into opportunities.” He emphasized a focus on long-term competitiveness rather than relying on short-term solutions.
In addition to financial challenges, Samsung is also facing labor unrest in India. Over 1,100 workers from Samsung’s Sriperumbudur plant have been on strike, demanding recognition from the Samsung India Workers’ Union. Tamil Nadu Industries Minister TRB Rajaa has been in discussions with company management about how to resolve the situation.
The recent apology from Samsung highlights the serious challenges the company faces in a competitive market. With ongoing organizational changes and a commitment to improve technical competitiveness, the future will be crucial for Samsung as it seeks to regain its position in the industry.
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