(Bloomberg) — Samsung Electronics Co. issued an apology to investors for disappointing results, admitting that the once-dominant memory chip giant is grappling with a potential crisis after losing its way.
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Jun Young-hyun, newly appointed head of the core semiconductor business, promised to overhaul the organization in an unusually frank statement issued after Samsung disclosed worse-than-projected revenue and profit. In another filing, Korea’s largest company confessed to delays in delivering a key type of chip used with Nvidia Corp. processors for training AI — allowing SK Hynix Inc. to dominate the so-called high-bandwidth memory arena.
Apart from lagging SK Hynix in HBM, it’s also shown little progress against Taiwan Semiconductor Manufacturing Co. in the outsourced production of custom-made chips. Samsung warned about “inventory adjustments” by unspecified customers, as well as increasing competition from a legacy or less-advanced Chinese memory chipmaker. Its shares slid as much as 1.8% Tuesday, on track for their lowest close since March 2023. That takes their overall loss to more than 20% this year.
“These are testing times,” Jun said in his statement, adding that the leadership took full responsibility for Samsung’s plight. “We have caused concerns about our technical competitiveness, with some talking about the crisis facing Samsung.”
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That underperformance is particularly painful given its longstanding market leadership and the boom in spending on AI hardware, which has buoyed Hynix as well as Micron Technology Inc. The largest US maker of memory chips reported last month that demand for AI gear will help boost revenue more than projected.
Samsung must now review its organizational culture and processes, Jun said — echoing previous comments about the need for fundamental change at one of Korea’s oldest companies. It’s begun laying off workers in Southeast Asia, Australia and New Zealand as part of a plan to reduce global headcount by thousands of jobs, Bloomberg News reported last week.
On Tuesday, the company reported a less-than-projected rise in preliminary operating profit to around 9.1 trillion won ($6.8 billion) in the September quarter, hurt in part by one-time performance bonuses. Revenue also gained less-than-expected to 79 trillion won. Samsung will provide a fuller financial statement with net income and divisional breakdowns on Oct 31.
“Markets are about ‘show me the money,” said Sanjeev Rana, an analyst at CLSA Securities Korea, referring to Jun’s comments. “The share price is going to rise when there are tangible signs of improvement.”
Till then, Samsung finds itself in the unusual position of playing catch-up to SK Hynix, which took the lead in producing the HBM chips paired with Nvidia’s AI accelerators.
The key now is to win certification for its highest-margin and most advanced HBM3E lineup of chips — something Samsung predicted in July would happen last quarter, in terms of 8-layer products.
The delay’s a key reason the Suwon, South Korea-based company has underperformed other AI stocks and the benchmark Kospi index.
Analysts have slashed their price targets on Samsung to factor in the chip division’s struggles in recent weeks. Macquarie in a Sept. 25 report cut Samsung from outperform to neutral, and lowered its target price to 64,000 won from 125,000 won.
“At Samsung, we have a deep and proven history of overcoming difficulties and of turning them into key opportunities,” Jun said in his statement. “Rather than relying on short-term solutions, we will focus on reinforcing our long-term competitiveness.”
–With assistance from Seyoon Kim, Shinhye Kang and Youkyung Lee.
(Updates with executive’s and analyst’s comments from the third paragraph.)
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