AI chip competition lags behind, Samsung's Q3 operating profit fell by 12.8% month-on-month! Chip head apologizes rarely

Intensified competition in AI chip market, Samsung's profit outlook disappoints, rare apology statement issued.

On Tuesday, October 8th, Samsung Electronics announced its profit guidance for the third quarter of 2024, expecting consolidated sales of approximately 79 trillion Korean won (approximately $586.3 billion) for the quarter ending in September, up 6.66% quarter-on-quarter and 17.21% year-on-year, lower than the 81.57 trillion won estimated by South Korean analysts; with a comprehensive operating profit of about 9.1 trillion Korean won (approximately $67.5 billion), down 12.83% quarter-on-quarter and up 274.49% year-on-year, but lower than the South Korean analysts' estimate of 11.5 trillion won.

Samsung stated that its memory division's performance declined due to "one-time costs and negative impacts," including inventory adjustments by mobile device manufacturers, among other factors, and also due to delays in the shipment of high-bandwidth memory HBM3E chips.

Earlier in September, Reuters reported that Samsung had instructed its global subsidiaries to reduce staff by 30% in certain departments.

Macquarie Securities research analysts stated that Samsung needs to flexibly control its memory supply, as the decline in demand for traditional dynamic random-access memory (DRAM) compared to smaller competitors could cause greater harm to Samsung.

Daniel Yoo, Head of Global Asset Allocation at Yuanta Securities Korea, believes that Samsung relies on old chips used in PCs and smartphones, but the demand for these chips has not picked up globally. Yoo said:

"Well, let's look at this number - very disappointing! Samsung is not aggressively pursuing market share as it did in the past, which I think is a big problem."

Since the beginning of the year, Samsung's stock price on the Korea Exchange has fallen by 22%, and after the profit outlook announcement today, the stock price dropped by 1.31%.

Samsung plans to release a detailed third-quarter performance report at the end of this month.

Rare Apology

Due to the disappointing Q3 profit outlook released by the company, Samsung's Vice Chairman and newly appointed head of the Device Solutions Division, Jun Young-hyun, issued a rare apology statement, the full statement is as follows:

Dear customers, investors, and employees who have always loved Samsung Electronics:

Today, the management of Samsung Electronics first offers our sincere apologies to you.

Due to our performance falling short of market expectations, causing concerns about our fundamental technological competitiveness and the future of the company, many are discussing a crisis at Samsung, and we, the leaders of the business, take full responsibility for this.

However, we will turn this crisis into an opportunity, as Samsung has a tradition of challenges, innovation, and overcoming.

We will definitely turn the severe situation we are facing into an opportunity to leap forward. Our management will lead the way in overcoming the crisis.

First and foremost, we will restore our fundamental technological competitiveness. Technology and quality are our lifelines, the pride of Samsung Electronics, and we will never compromise on them We will ensure basic competitiveness instead of seeking short-term solutions. Furthermore, I believe that only new technologies that do not exist in the world and perfect quality competitiveness can enable Samsung Electronics to make a comeback.

Secondly, we will prepare more thoroughly for the future. We will reignite the passion to fearlessly create the future, persist in our goals until they are achieved. We will rearm ourselves with a challenger's spirit to aim for higher goals, rather than holding a defensive mindset to protect existing assets.

Thirdly, we will reexamine our organizational culture and working methods, immediately correcting areas that need improvement. We will rebuild a traditional organizational culture of trust and communication. If we identify issues, we will honestly expose them and engage in intense discussions to improve them. When the opportunity arises, we will actively communicate with investors.

Dear customers, investors, and employees, if we dare to challenge ourselves, we are confident that we can turn the current crisis into new opportunities. Please support and encourage us so that Samsung Electronics can once again demonstrate its strength.

Thank you.

Vice Chairman of Samsung Electronics

Head of Device Solutions Division

Jun Young-hyun