Samsung issues rare apology for weak results as it struggles in AI chips
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Samsung has lagged behind SK Hynix in supplying high-margin memory chips used in AI servers to AI leader Nvidia.
PHOTO: REUTERS
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SEOUL – Samsung Electronics issued a lengthy apology after posting disappointing results, an unusual admission by the world’s largest memory chipmaker that it is grappling with a potential crisis.
Mr Jun Young-hyun, newly appointed head of the core semiconductor business, promised to overhaul the organisation in an unusually frank statement issued after Samsung disclosed worse than projected revenue and profit.
In another filing, South Korea’s largest company confessed to delays in delivering a key type of chip used with Nvidia processors for training artificial intelligence (AI) models – allowing South Korean rival SK Hynix to dominate the so-called high-bandwidth memory (HBM) arena.
Samsung has also shown little progress against Taiwan Semiconductor Manufacturing Company 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 per cent on Oct 8, on track for their lowest close since March 2023. That takes their overall loss to more than 20 per cent this year.
“These are testing times,” Mr Jun said, adding that the leadership takes full responsibility.
“We have caused concerns about our technical competitiveness, with some talking about the crisis facing Samsung.”
That underperformance is particularly painful given its longstanding market leadership and the boom in spending on AI hardware, which has buoyed SK Hynix and Micron Technology.
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 organisational culture and processes, Mr Jun said, echoing previous comments about the need for fundamental change at one of South Korea’s oldest companies.
It laid off an undisclosed number of workers in Singapore earlier in October as it cut thousands of jobs globally. Samsung has about 147,000 staff overseas, more than half of its total employee count of over 267,800, according to its latest sustainability report.
On Oct 8, the company reported a less than projected rise in preliminary operating profit to around 9.1 trillion won (S$8.8 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 give a fuller financial statement with net income and divisional breakdowns on Oct 31.
The company 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 line-up of chips.
“At Samsung, we have a deep and proven history of overcoming difficulties and of turning them into key opportunities,” Mr Jun said.
“Rather than relying on short-term solutions, we will focus on reinforcing our long-term competitiveness.” BLOOMBERG
