Samsung’s apology signals they’re slipping in the AI race

Samsung Electronics has publicly apologized and admitted it’s facing what many are calling a “crisis” after revealing lower-than-expected profits. According to the Financial Times, the South Korean tech giant reported an operating profit of 9.1 trillion won ($6.8 billion) for the third quarter, falling short of market forecasts, which had predicted 10.3 trillion won, as per LSEG SmartEstimates.

While profits have nearly tripled compared to the same time last year—thanks to rising memory chip prices—they’re still down about 13% from the second quarter. On top of that, the company’s stock has dropped nearly 30% in the past six months, as concerns grow about its ability to stay competitive in the race for advanced AI chips.

Below is a translated version of the statement of Samsung Electronics:

Dear valued customers, investors, and employees of Samsung Electronics,

Today, on behalf of the management team at Samsung Electronics, I would like to begin by offering our sincere apologies.

We understand that our recent performance has fallen short of market expectations, leading to concerns about both our fundamental technological competitiveness and the future of the company. Many have voiced concerns about a crisis at Samsung, and we, the leadership, take full responsibility for this situation.

To our valued customers, investors, and employees,

However, Samsung has always transformed crises into opportunities through challenge, innovation, and perseverance. We are committed to turning this difficult situation into a catalyst for our next leap forward, and our management team will lead the way in overcoming this crisis.

Above all, we will restore our core technological competitiveness. Technology and quality are our lifeblood, and they represent the pride of Samsung Electronics—values we will never compromise. Instead of pursuing short-term fixes, we will focus on securing long-term competitiveness. We firmly believe that the only path to Samsung’s resurgence lies in developing groundbreaking technologies and achieving uncompromising quality.

Secondly, we will rigorously prepare for the future. With unwavering resolve, we will forge ahead and reignite the passion that drives us to pursue our goals with relentless determination. We will rearm ourselves with the spirit of challenge, aiming for higher goals rather than merely protecting what we have.

Thirdly, we will reevaluate our organizational culture and working methods, and we will promptly correct any issues. We will rebuild a culture of trust and communication, which has always been one of our core traditions. When problems arise in the field, we will bring them to light and engage in open, rigorous discussions to resolve them. In particular, we will maintain active communication with our investors whenever the opportunity arises.

Dear customers, investors, and employees,

We are confident that if we tackle these challenges head-on, we can turn this crisis into a new opportunity. We kindly ask for your continued support and encouragement as Samsung Electronics demonstrates its strength once again.

Thank you.

Sincerely,
JY Jeon
Vice Chairman and Head of the DS Division, Samsung Electronics

Earlier this year, Samsung’s so-called crisis led the company to implement a six-day workweek for its executives. The tough decision came after a rough 2023, marked by rising competition and a decline in chip demand. However, the AI boom was supposed to turn things around, as evidenced by a 15x profit increase last quarter, fueled by strong sales of its high-bandwidth memory chips to NVIDIA.

Now, though, Samsung is facing new challenges. The company recently announced that sales of its top-tier HBM3E chips to a major customer have been delayed, giving competitors like SK Hynix the chance to enter.

The company has acknowledged its difficulties, with Samsung’s chip division head, Young Hyun Jun, apologizing for not meeting expectations. Despite the AI boom, which has significantly boosted profits for competitors, Samsung is finding it tough to capitalize on this opportunity. Its delay in entering the AI race, compounded by slowing demand for traditional memory chips, has raised questions about its ability to maintain market leadership in a highly competitive field.

Featured image credit: Valentyn Chernetskyi/Unsplash