Samsung Electronics Faces Profit Woes Amid AI Chip Struggles
Samsung Electronics issues rare apology for disappointing profit forecast Challenges in AI chip supply to Nvidia contribute to semiconductor earnings decline. Analysts express concerns over Samsung's competitiveness and market position.
The tech giant is grappling with challenges in supplying high-end chips to Nvidia in the thriving AI market, lagging behind its competitors.
The company cited a delay in its AI chip business with a major customer and increased supplies of conventional chips from Chinese rivals as factors contributing to the decline in its semiconductor earnings. Samsung estimated an operating profit of US$6.78 billion for the quarter.
Analysts express concerns over Samsung's earnings outlook, particularly in comparison to SK Hynix, highlighting its late response to the AI chip market and heavy reliance on traditional chips. The company's share price has already dropped over 20% this year, further impacted by the recent profit warning.
Samsung's Vice Chairman of Device Solutions Division, Young Hyun Jun, acknowledged the challenges, stating, "We have caused concerns about our technological competitiveness." He pledged to focus on enhancing long-term technological capabilities to address the current market dynamics.
The company's struggles in the chip market have been further compounded by its contract chip manufacturing business, which faces tough competition from industry leader TSMC. Despite the setbacks, Samsung's mobile division saw improved earnings from flagship smartphone sales, and its display unit experienced growth with the launch of new models by key customers like Apple.
Samsung's decision not to spin off its contract chip manufacturing business, as confirmed by Chief Jay Y. Lee, indicates a commitment to navigating the current challenges rather than restructuring. The company attributes the decline in chip earnings to one-off costs and unfavourable currency exchange rates.
Looking ahead, Samsung is set to announce detailed earnings results at the end of October. The company's strategic moves in response to the profit warning will be closely watched as it aims to address the competitive landscape and strengthen its position in the semiconductor market.
Samsung Electronics issues rare apology for disappointing profit forecast
Challenges in AI chip supply to Nvidia contribute to semiconductor earnings decline
Analysts express concerns over Samsung's competitiveness and market position
Source: REUTERS