Samsung Electronics has made a rare public apology, admitting that it is facing a “crisis” in its technological competitiveness. Despite the booming global demand for AI technology, the tech giant announced lower-than-expected profit guidance for the third quarter of 2024, signaling the challenges it faces in keeping pace with the rapid evolution of the industry.
Disappointing Earnings Amid AI Growth
Samsung revealed its expected third-quarter profits to be 9.1 trillion won ($6.8 billion), a significant increase of 274.5% from the previous year. However, the results fell short of market expectations as the company struggles to capitalize on the high demand for chips used in artificial intelligence servers. Despite the global AI boom, Samsung has been unable to leverage the surge in demand for AI-related technology effectively.
Samsung’s Apology and Strategic Shift
In an official statement signed by Jun Young-hyun, vice chairman of Samsung’s device solutions division, the company issued an apology: “Today, we, the management of Samsung Electronics, would like to first say sorry to you.” The statement went on to express concerns about the company’s declining technological competitiveness, noting that this has sparked fears about the company’s future trajectory.
Samsung’s management assured that they will take decisive action to overcome the current crisis, emphasizing their commitment to turning the difficult situation into an opportunity for resurgence and innovation.
Struggles with High-Bandwidth Memory (HBM) Chips
One of the key reasons behind Samsung’s disappointing earnings is its struggle in the high-bandwidth memory (HBM) chip sector. These chips are critical in AI chipsets, an area where Samsung has fallen behind South Korean rival SK Hynix. Industry experts, like Kim Dae-jong from Sejong University in Seoul, believe that this technological gap has been exacerbated by the loss of key employees to competitors, placing Samsung in a “grave situation.”
Workforce Reductions and Adjustments
The apology came shortly after Samsung announced plans to reduce its workforce in some Asian markets. While the company described the move as “routine workforce adjustments,” reports suggest that up to 30% of its overseas employees could be affected by the layoffs. Bloomberg indicated that approximately 10% of staff may be impacted in certain regions.
Market Reaction and Future Outlook
In response to the news, Samsung’s shares dropped by 1.31% in afternoon trading in Seoul, with the stock down nearly 30% over the past six months. Analysts believe that while Samsung plays a vital role in the global supply chain, the company’s struggles in the memory sector, particularly delays in high-demand chips, could continue to affect its short-term performance.
However, Jene Park, a senior analyst at Counterpoint Research, suggests that while there is a decline in the memory sector, a sharp fall in overall profits is unlikely. Samsung’s estimated third-quarter sales are projected to increase by 17.2% year-on-year, reaching 79 trillion won.
Samsung has promised to “quickly assess and make necessary adjustments to workplace culture,” indicating a renewed focus on internal changes as the company works to regain its competitive edge.
Conclusion: A Commitment to Recovery
Despite the challenges ahead, Samsung’s management has vowed to lead the company through this crisis and make the necessary changes to stay competitive in the evolving tech landscape. With plans to innovate and refocus on core technologies, the company hopes to turn this period of difficulty into a catalyst for future growth and innovation.
Stay tuned for Samsung’s final earnings report, set to be released at the end of the month, as the company looks to rebound from this challenging phase.
For more updates, check Samsung’s official tweet here.
