Samsung Electronics acknowledged a significant challenge to its technological competitiveness on Tuesday, issuing a rare apology and describing the situation as a “crisis.”
This acknowledgment follows a disappointing profit guidance despite the ongoing global boom in artificial intelligence.
The tech giant projected third-quarter profits of 9.1 trillion won ($6.8 billion), representing a substantial increase of 274.5 percent year-on-year. However, this figure fell short of market expectations, indicating difficulties in capitalizing on the robust demand for chips used in AI servers.
READ ALSO: Samsung bans staff from use of ChatGPT
“Today, we, the management of Samsung Electronics, would like to first say sorry to you,” stated Jun Young-hyun, vice chairman of the company’s device solutions division. He expressed that “concerns have arisen about our fundamental technological competitiveness and the future of the company” as a result of the disappointing figures.
Despite the significant year-on-year growth, the forecast reflects a nearly 13 percent decline from the previous quarter. This rare admission of fault follows an announcement from Samsung about plans to reduce staff in certain Asian operations, which the company described as “routine workforce adjustments.”
Reports indicated that layoffs could impact up to 30 percent of overseas employees in some areas, with Bloomberg suggesting that around 10 percent of the workforce could be affected.
Analysts have pointed to Samsung’s struggle to keep pace with competitors, particularly South Korea’s SK Hynix, in the production of high bandwidth memory (HBM) chips critical for AI technologies.
Kim Dae-jong, a professor at Sejong University, noted, “Given the circumstances, it appears that Samsung has also lost a significant number of (HBM-related) employees to SK Hynix.” He characterized the situation as a “grave” challenge for the company.
In response to the crisis, Samsung management indicated they would “quickly assess and make any necessary adjustments to our workplace culture.” The firm is a flagship subsidiary of Samsung Group, the largest family-controlled conglomerate in South Korea.
Analyst Jene Park from Counterpoint Research commented on the situation, noting an “expected decline” in Samsung’s memory sector due to delays in the supply of new chips and a general reduction in memory demand.
However, he added that a sharp profit or sales decline was unlikely in the near future, emphasizing Samsung’s vital role in the global supply chain.
Samsung expects its sales for the third quarter to rise 17.2 percent year-on-year to 79 trillion won, with the final earnings report set to be released at the end of this month.
