Samsung Electronics Co. has issued an apology for its disappointing third-quarter earnings, which fell short of market expectations.
The company is grappling with significant challenges in the competitive AI chip sector, which has contributed to a decline in its operating profits.
The South Korean tech giant projected an operating profit of approximately 9.1 trillion won (about $6.78 billion) for the three months ending September 30. This estimate was below the 10.3 trillion won anticipated by analysts, reflecting a sharp drop from 2.43 trillion won in the same quarter last year and a decline from 10.44 trillion won in the previous quarter.
Samsung’s vice chairman, Jun Young-hyun, acknowledged the company’s struggles, noting that delays in its AI chip business and increased competition from Chinese rivals have affected earnings in its semiconductor division.
“We have caused concerns about our technological competitiveness, with some talking about the crisis facing Samsung,” Jun stated.
He emphasized the need for the company to improve its technology and organizational culture to restore confidence.
The company has faced pressure in the AI chip market as it trails behind rivals like SK Hynix in supplying high-bandwidth memory (HBM) chips, which are essential for AI processing. Analysts pointed out that Samsung’s late entry into the AI chip market has heightened its dependence on traditional, lower-margin chips, leaving it vulnerable to competition amid slowing demand for smartphones and PCs.
Samsung’s share price dropped by 1.3% following the announcement, continuing a downward trend that has seen its stock fall more than 20% this year. The company is also facing challenges in its contract chip manufacturing business, which has struggled to compete with leading firms such as Taiwan Semiconductor Manufacturing Company (TSMC).
Despite these hurdles, Samsung reported improvements in its mobile division, driven by strong sales of its flagship smartphones. The company has previously announced plans to ramp up production of its high-end HBM3E chips, although delays in sales to a major customer have been noted.
Samsung is set to release detailed financial results on October 31, which will provide further insights into the company’s performance amid these challenging market conditions.
With input from Reuters, the Verge, Bloomberg. and the Wall Street Journal.
