Samsung Faces AI Chip Crisis: Apologizes for Disappointing Profit and Production Delays

Samsung Warns of Lower Earnings as Tech Giants Race to Meet Demand for AI | PYMNTS.com

When Samsung warned this week that its third-quarter profits would fall short of expectations, it wasn't just a blip for the South Korean tech giant. It signifies a seismic shift rippling through global technology commerce, driven by the increasing demand for artificial intelligence (AI) products. Samsung, once a leader in memory chips and consumer electronics, is racing to adapt to AI's growing influence. Its struggle to catch up in high-end AI chip production underscores a wider issue for traditional tech giants: innovate quickly in AI or fall behind. "As chips advance, they are far more complex in design and fabrication processes," Michelle Brophy, technology, media and telecommunications research director at the market intelligence firm AlphaSense, told PYMNTS. "None of the major chip manufacturers have been immune to growing pains, though Taiwan Semiconductor has been the market leader by far." The tech giant estimated its operating profit for the quarter ended Sept. 30 at 9.1 trillion won ($6.78 billion), well below analysts' projections of 10.3 trillion won ($7.66 billion). This shortfall prompted a rare apology from Samsung executives, who acknowledged the company faces headwinds in the rapidly evolving semiconductor landscape. At the heart of Samsung's challenges is a delay in its AI chip business with a major customer, widely believed to be Nvidia, Reuters reported. Simultaneously, the company is grappling with increased competition from Chinese rivals in conventional chip markets. These setbacks come as demand for AI-optimized chips surges, forcing traditional semiconductor manufacturers to adapt their product lines and production processes rapidly. This shift is redrawing the map of global tech commerce. Firms specializing in AI-optimized chips have seen their market value soar, while traditional semiconductor giants like Samsung and Intel race to catch up. The ripple effects extend beyond the chip industry, touching everything from smartphone production to cloud computing infrastructure. In the memory chip market, where Samsung has long reigned supreme, the company now faces stiff competition from smaller rival SK Hynix in supplying high-bandwidth memory (HBM) chips crucial for AI applications, Brophy said. The implications for global commerce are profound. The race to develop AI capabilities intensifies competition between tech hubs like Silicon Valley, Seoul and Shenzhen in China, potentially reshaping global trade flows in high-tech goods. "Longer term, I would expect the growth of AI products and applications to serve as a tailwind to the broader market," Brophy said. Moreover, the AI revolution is blurring traditional industry boundaries. Cloud service providers are increasingly designing their chips, while chipmakers are expanding into software and services. This convergence is forcing companies to rethink their business models and competitive strategies. The impact of AI extends to the smartphone market as well. "AI will likely play a major role in reshaping the high-end smartphone market, from both a software and hardware perspective, as AI requires specialization," Brophy told PYMNTS. "Samsung is in a strong position overall because the company has the in-house development, design and semiconductor foundry capacity to support and scale those designs." Samsung's journey to catch up in AI chip production and rethink its broader product strategy could serve as a bellwether for the industry, with Samsung Vice Chairman Young Hyun Jun noting: "These are testing times." How Samsung and its peers navigate these turbulent waters will likely shape the future of global tech commerce for years to come.

Samsung Electronics apologises for disappointing profit as it struggles in AI chips

Samsung Electronics warned its third-quarter profit would come in below market expectations and apologised for the disappointing performance with the tech giant lagging its rivals in supplying high-end chips to Nvidia in the booming AI market. Samsung said its AI chip business with an unidentified major customer was hit by a delay, while Chinese chip rivals increased supplies of conventional chips, contributing to the decline in its semiconductor earnings. The comments illustrate the challenges facing the company, which has been the world's biggest memory chipmaker for three decades but is battling growing competition in both conventional and advanced chips. The world's largest memory chip, smartphone and TV maker estimated an operating profit of 9.1 trillion won ($6.78 billion) for the three months ended Sept. 30, versus a 10.3 trillion won LSEG SmartEstimate. That would compare with 2.43 trillion won in the same period a year earlier and 10.44 trillion won in the preceding quarter. "The earnings are a shock compared to what many analysts expected initially," said Lee Min-hee, an analyst at BNK Investment & Securities. "I don't see its earnings improving in the current quarter," he said, saying it lags SK Hynix in increasing sales of high bandwidth memory (HBM) chips to Nvidia and its high exposure to the Chinese market hurts. Samsung's late response to the AI chip market increases its reliance on traditional, lower-margin chips, making it more vulnerable to competition from China and slowing demand for smartphones and PCs, analysts say. High-margin chips used in AI servers are driving a recovery in the chip market after a post-pandemic downturn last year. Still, Samsung has lagged SK Hynix in supplying high-bandwidth memory (HBM) chips to AI leader Nvidia. "We have caused concerns about our technological competitiveness, with some talking about the crisis facing Samsung," Young Hyun Jun, Vice Chairman, Device Solutions Division, Samsung Electronics, said. "These are testing times," he said, pledging to turn the challenge into an opportunity and focus on enhancing long-term technological competitiveness. Samsung's share price, already down more than 20% so far this year, fell 1.6% after the earnings guidance. HBM Chips Delayed Samsung said in a statement the start of sales of its high-end HBM3E chips to a major customer "was delayed relative to our expectations". It did not elaborate on the issue. Earnings declined in the company's memory chip business as Chinese rivals increased supplies of "legacy" products and some mobile customers adjusted inventories, offsetting solid demand for HBM and other chips used in servers, Samsung added. Samsung's contract chip manufacturing business, which designs and produces custom-made chips for other companies, likely continued to lose money in the third quarter as it is struggling to compete with leader TSMC, which counts Apple and Nvidia among its customers, analysts said. Samsung's chief Jay Y. Lee told Reuters on Monday that he is not interested in spinning off the contract chip manufacturing business as well as its logic chip designing operation. Samsung said one-off costs such as provisions for "incentives" and the unfavourable local currency also contributed to the chip earnings decline. Earnings in its mobile division improved from the preceding quarter on solid sales of its flagship smartphones, while earnings at its display unit grew as its customers, which include Apple, launched new models. Samsung will announce detailed earnings results later this month. In May, Samsung abruptly replaced the chief of its semiconductor division, handing the reins to Jun in a bid to overcome a "chip crisis". Samsung is also cutting as much as 30% of overseas staff at some divisions, Reuters reported in September, underscoring the challenges it faces. Its U.S. rival Micron last month forecast first-quarter earnings ahead of Wall Street estimates and reported its highest quarterly revenue in over a decade on the back of booming demand for its memory chips used in AI.

Samsung Apologies for Disappointing Profit as It Struggles in AI Chips

Samsung's sales of HBM3E chips to a major customer has been delayed Samsung Electronics warned its third-quarter profit would come in below market expectations and apologised for the disappointing performance with the tech giant lagging its rivals in supplying high-end chips to Nvidia in the booming AI market. The rare apology illustrates the challenges facing the company, which has been the world's biggest memory chipmaker for three decades but is battling growing competition in both conventional and advanced chips. Samsung said its AI chip business with an unidentified major customer was hit by a delay, while Chinese chip rivals increased supplies of conventional chips, contributing to the decline in its semiconductor earnings. The world's largest memory chip, smartphone and TV maker estimated an operating profit of KRW 9.1 trillion ($6.78 billion or 56,631 crore) for the three months ended September 30, versus a KRW 10.3 trillion (roughly Rs. 64,086) LSEG SmartEstimate. That would compare with KRW 2.43 trillion (roughly Rs. 15,117 crore) in the same period a year earlier and KRW 10.44 trillion (roughly Rs. 64,948 crore) in the preceding quarter. "The earnings are a shock compared to what many analysts expected initially," said Lee Min-hee, an analyst at BNK Investment & Securities. "I don't see its earnings improving in the current quarter," he said, saying it lags SK Hynix in increasing sales of high bandwidth memory (HBM) chips to Nvidia and its high exposure to the Chinese market hurts. Samsung's late response to the AI chip market increases its reliance on traditional, lower-margin chips, making it more vulnerable to competition from China and slowing demand for smartphones and PCs, analysts say. High-margin chips used in AI servers are driving a recovery in the chip market after a post-pandemic downturn last year. Still, Samsung has lagged SK Hynix in supplying high-bandwidth memory (HBM) chips to AI leader Nvidia. "We have caused concerns about our technological competitiveness, with some talking about the crisis facing Samsung," Young Hyun Jun, Vice Chairman, Device Solutions Division, Samsung Electronics, said. "These are testing times," he said, pledging to turn the challenge into an opportunity and focus on enhancing long-term technological competitiveness. Samsung's share price, already down more than 20 percent so far this year, fell 1.3 percent, underperforming a 0.4 percent fall in the benchmark KOSPI. HBM Chips Delayed Samsung said in a statement the start of sales of its high-end HBM3E chips to a major customer has been "delayed relative to our expectations". It did not elaborate on the issue. Samsung said in July it would start mass-producing the chips during the July to September period. Earnings declined in the company's memory chip business as Chinese rivals increased supplies of "legacy" products and some mobile customers adjusted inventories, offsetting solid demand for HBM and other chips used in servers, Samsung added. Samsung's contract chip manufacturing business, which designs and produces custom-made chips for other companies, likely continued to lose money in the third quarter as it is struggling to compete with leader TSMC, which counts Apple and Nvidia among its customers, analysts said. Samsung's chief Jay Y. Lee told Reuters on Monday that he is not interested in spinning off the contract chip manufacturing business as well as its logic chip designing operation. Samsung said one-off costs such as provisions for "incentives" and the unfavourable local currency also contributed to the chip earnings decline. Earnings in its mobile division improved from the preceding quarter on solid sales of its flagship smartphones, while earnings at its display unit grew as its customers, which include Apple, launched new models. Samsung will announce detailed earnings results on October 31. In May, Samsung abruptly replaced the chief of its semiconductor division, handing the reins to Jun in a bid to overcome a "chip crisis". Samsung is also cutting as much as 30 percent of overseas staff at some divisions, Reuters reported in September, underscoring the challenges it faces. Its US rival Micron last month forecast first-quarter earnings ahead of Wall Street estimates and reported its highest quarterly revenue in over a decade on the back of booming demand for its memory chips used in AI. © Thomson Reuters 2024

Samsung Apologizes for AI 'Crisis' As it Falls Behind Major Rivals

Samsung executives are apologizing to investors amid a "crisis" in its chipmaking business. Samsung has been a top memory chipmaker for three decades but has recently been losing ground to rivals on both conventional and advanced AI chips. "A lot of people are talking about Samsung's crisis, and the full responsibility lies with us, those who are leading the business," says Young Hyun Jun, vice chairman of Samsung's device solutions division. The company reported a Q3 2024 operating profit of $6.8 billion (9.1 trillion Korean won), a miss from analyst expectations of $7.6 billion (10.3 trillion Korean won) and a drop from last quarter's $7.7 billion (10.44 trillion Korean won). These are only early estimates and not the final numbers, but the news follows last month's report of Samsung cutting around 147,000 staff, up to 30% in some divisions, Reuters reports. "These are testing times," says Jun, who took over the division in May after a management shakeup. On the bright side, Samsung reported increased sales and profit compared to Q3 2023, when there was a "global slowdown in the chip industry," according to The Korea Times. But the "quarter-on-quarter decline is more significant, indicating that the company's profitability has regressed within just three months." One issue has been delays in providing AI-specific, high-bandwidth memory (HBM) 3e chips to Nvidia, which have not yet passed Nvidia's quality tests. At the same time, rival SK Hynix has already begun mass production of 12-layer HBM 3e chips for Nvidia, widening the technology gap with Samsung in a fast-growing, high-margin segment. Jun promised to "turn the grave situation into an opportunity for a new leap forward" and dispel "concerns about our fundamental technological competitiveness and the future of the company." But even if Samsung accelerates its HBM production, it may have missed the boat on an already saturated market. Big Tech AI investment could begin to slow down as investors get cold feet about spending billions for a far-off, uncertain payday, The New York Times reports. Conventional chips, Samsung's bread and butter, are also facing demand issues with a slowdown in the smartphone and PC market. Chinese rivals have also flooded the market with increased supplies of these "legacy" products, Samsung says. "Concerns are growing as legacy memory demand is slowing...while [Samsung's] entry into the HBM market gets delayed compared with rivals," Kim Hyun-tae, an analyst at Shinhan Securities, tells The Financial Times.

Samsung Reportedly Fails To Secure NVIDIA As An "HBM Customer", Witnessing Massive Business Impact

Samsung has addressed consumers and investors about the firm's disappointing performance in the AI markets, especially its "failure" in the HBM segment. The Korean giant is having a tough time when it comes to securing the major industry players, such as the likes of NVIDIA, due to which Samsung has revealed that their Q3 2024 earning guidance would come in below market expectations. While there are several factors accounting for the reason behind this "economic downfall", Samsung's late entry into the AI markets, coupled with growing competition from the likes of SK hynix and TSMC, has pushed back the Korean giant, which they have admitted in a post addressing the general public. To our customers, investors, and employees who have always loved Samsung Electronics, Today, we, the management of Samsung Electronics, would like to first apologize to you. The performance that fell short of market expectations has raised concerns about the fundamental technological competitiveness and the future of the company. Many people are talking about Samsung's crisis. All of this responsibility lies with us who are leading the business. Dear customers, investors and employees, I am confident that if we challenge ourselves fiercely, we can definitely turn the current crisis into a new opportunity. I ask for your support and encouragement so that Samsung Electronics can once again demonstrate its strength. Thank You Samsung Electronics DS Division Vice Chairman Jeon Young-hyun via Samsung Newsroom Samsung says that they failed to secure a significant AI "anonymous" customer (via Reuters). While they didn't give us any names, the leading candidate is none other than NVIDIA, given the track record of developments we witnessed with NVIDIA and Samsung collaborating for an HBM partnership. The Korean giant hasn't explicitly confirmed this, but based on what the firm claims, it looks like NVIDIA has pushed Samsung off the list. Samsung says the supply of high-end HBM3E AI chips has been delayed, putting them far behind the competition. Not only this, but Samsung claims that the supply of traditional semiconductors from Chinese firms has hindered the company's business. Currently, the production capacity of China's semiconductor industry has grown massively, which has attracted companies looking to acquire lower-margin chips but in higher quantities. So, Samsung has seen a hit in this segment as well, which is why the firm's foundry business has been hit massively. However, Samsung isn't expecting to undergo "radical" changes. In a recent statement by Chairperson Jay Y. Lee, the Korean firm won't spin off the foundry business but will continue to be indulged in the race. Right now, Samsung is faced with severe issues, including ineffective 3nm yields and troubles in the production of next-gen processes. Hence, the foundry division isn't really in the best of position for now. Samsung needs to pick up the pace if it wants to be consistent in the markets. The immense competition from the likes of TSMC is making it hard for the Korean giant to sustain itself in this situation.

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: 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.

Samsung says sorry for being slow to the AI party

STORY: Samsung Electronics had an apology for investors on Tuesday. The tech giant announced that its third-quarter profit would be lower than expected. It said sorry for falling behind rivals in providing high-end chips to Nvidia in the booming AI market. The South Korean firm said delays with a major AI chip customer, and increased competition from Chinese chipmakers led to a drop in its semiconductor earnings. It all highlights the challenges for Samsung, which faces increasing rivalry in both regular and advanced silicon. The world's largest maker of memory chips, smartphones and TVs estimated a profit of just under $6.8 billion for the three months till the end of September - well below expectations. One analyst said that the numbers were a "shock", and looked unlikely to improve soon. Samsung's slow entry into the AI chip market has made it more reliant on lower-margin chips, increasing its vulnerability to Chinese competition and waning demand for smartphones and PCs. High-margin AI server chips are helping the chip market recover, but Samsung is lagging local rival SK Hynix in supplying such products to Nvidia. Samsung shares are down over 20% this year, and dropped another 1% or so following Tuesday's news.

Samsung apologizes to investors over weak Q3 guidance, poor chip performance

Samsung's transition into the age of AI has not been smooth -- and company management appears painfully aware of this. When the Korean appliance and electronics giant announced weaker-than-expected guidance on Tuesday for Q3 earnings, vice chairman Young Hyun Jun addressed the results in a forthright letter to customers, investors, and employees. "Today, the leadership team at Samsung Electronics wishes to apologize for not meeting your expectations with our performance," wrote Yun, the head of the company's chip division. "We have caused concerns about our technical competitiveness, with some talking about the crisis facing Samsung. As leaders of the business, we take full responsibility for this." This isn't the first time Samsung leaders have delivered a tough message to investors. After reporting falling annual revenue and profits in March, the company opened its yearly letter to shareholders by admitting that 2023 had been "exceptionally challenging," noting competition in the all-important memory business had intensified amid a deep industry downturn. Similar challenges have persisted in 2024. On its face, comparative results looked great, with the company estimating operating profit would come in around 9.1 trillion won, or $6.76 billion, up from 2.430 trillion won a year ago. That number is down almost 13% from last quarter and comes below expectations, however, which Yun's letter acknowledged. Despite Samsung reporting its highest quarterly revenues in over two years, the company's Korea-listed shares fell 1% on Tuesday. The stock is down 24% this year as Samsung has so far struggled to generate a return on its investments in artificial intelligence while several of its core businesses lose market share. Slowing PC and mobile demand has weighed on the memory market, including for dynamic random-access memory, or DRAM, an area where Samsung has traditionally dominated. The company has also lagged in the market for high-bandwidth memory chips, which are critical components of Nvidia's GPUs, with competitors SK Hynix and Micron better equipped to profit off the AI boom. That's also the case in contract semiconductor manufacturing, where Samsung -- much like another legacy tech name in Intel -- has failed to meaningfully close the gap with Taiwan Semiconductor Manufacturing Co. Macquarie analysts recently warned Samsung's $17 billion foundry in Texas, initially seen as a major win for the Biden administration and the CHIPS Act, could become a "big stranded asset," the Financial Times noted. Meanwhile, competition in high-end smartphones after recent releases from Huawei and Apple, particularly after the iPhone 16 reveal last month, doesn't make the picture any prettier. In Tuesday's contrite letter to investors, Jun promised Samsung would address these and other issues head-on. "These are testing times," he wrote. "But we are confident that we will turn this season of challenge into one of new opportunities."

Wall Street Breakfast: Behind The Curve

Samsung Electronics (OTCPK:SSNLF) has issued a rare apology after warning of weaker-than-expected Q3 profit, as the South Korean tech giant struggles to keep up with rivals in the artificial-intelligence chip race. The world's biggest memory chipmaker's preliminary estimate for Q3 operating profit is 9.1T won ($6.74B), down 12.8% from Q2. Sales are expected to rise 6.7% sequentially to 79T won ($58.57B). What went wrong: "Despite strong HBM/server demand, the Memory Business recorded a decrease in results due to inventory adjustments by some mobile customers and an increase in supply of legacy products from memory companies in China," Samsung said in a statement. "One-off expenses and currency effects also impacted performance." It added that the delivery of HBM3E chips to a major unnamed customer was delayed. Falling behind: The high-bandwidth memory chips were reportedly cleared for use in Nvidia's (NVDA) AI processors in August. To note, South Korea's SK hynix (OTCPK:HXSCF) and U.S. chipmaker Micron Technology (MU) also produce HBM3E chips with higher bandwidth that's key for AI memory. SK hynix, which has been speeding ahead with HBM3E development, recently began mass production of the world's first 12-layer HBM3E product with the largest capacity of existing HBM. A Bank of America analyst recently said HBM is a "two horse race" between Micron and SK hynix. Taking accountability: Jun Young-hyun, head of Samsung's device solutions, said management takes full responsibility for the disappointing performance that "raised concerns about the fundamental technological competitiveness and the future of the company." Samsung pledged to restore its competitiveness, prepare for the future more thoroughly, and fix any organizational culture issues. Samsung will report its financial results on October 31. (2 comments)

Samsung Apologizes for Expected Earnings Miss Amid Chip Challenges -- 2nd Update

Samsung Electronics acknowledged its struggle to make headway in supplying more advanced chips as it projected third-quarter earnings growth to slow sharply, hurt in part by China's oversupply of lower-end chips eating into its semiconductor margins. The world's largest maker of memory chips and smartphones forecast a near-fourfold increase in operating profit, a significant slowdown from the nearly 16-fold surge in the previous quarter and missing market estimates. Inventory adjustments at some client smartphone makers and China's increased supply of legacy chips weighed on the quarterly results for its memory-chip segment, the South Korean technology giant said Tuesday. Legacy, or mature, semiconductors are still widely used in cars, planes and home appliances. Samsung also attributed the below-consensus preliminary earnings to one-off bonus payments. In a rare apology Tuesday, the company vowed to step up efforts to regain and keep its competitive edge following the disappointing performance. It also admitted to struggling to catch up with rivals in the advanced artificial-intelligence chip segment. "Today, Samsung Electronics management would like to apologize to you first," Jun Young-hyun, the newly appointed head of the company's flagship chip business, said in a statement. "The performance that didn't meet market expectations raised concerns about the fundamental-technology competitiveness and future of the company." The company estimated an operating profit of 9.100 trillion won, equivalent to $6.76 billion, for the quarter ended September. That compared with 2.430 trillion won a year earlier but fell short of a FactSet-compiled consensus forecast of 11.146 trillion won. Quarterly revenue likely rose 17% to 79.000 trillion won, it said, also missing analysts' expectations. The downbeat earnings guidance came amid growing market concerns that the South Korean tech giant could face challenges from weaker-than-expected semiconductor prices and sluggish sales of mobile handsets and personal computers. Analysts recently issued gloomy earnings outlooks for Samsung and lowered their target prices for the company, citing a delay in its shipments of advanced high-bandwidth-memory chips for artificial-intelligence applications. Samsung has lagged behind its chip-making rivals in advancing HBM products, a crucial component for AI and other powerful computing devices. Nvidia has been testing Samsung's HBM3E products for qualification, while smaller home-country competitor SK Hynix has mass produced its rival products for the U.S. AI chip giant. Shares in Samsung have fallen more than 20% this year, significantly underperforming the broader market. The stock was 1.3% lower in Tuesday afternoon trading. The company is set to release full quarterly results later this month.

Samsung sees weaker-than-expected Q3 profit By Investing.com

Investing.com-- Samsung Electronics Co Ltd (KS:005930) presented a weaker-than-expected third-quarter profit estimate on Tuesday, as an initial boost from artificial intelligence demand now appeared to be running out of steam. The South Korean conglomerate said it expects operating profit for the quarter to September 30 of about 9.10 trillion won ($6.77 billion), which is weaker than Bloomberg estimates of 11.48 trillion won. While the figure is a nearly fourfold jump from the 2.43 trillion won seen last year, it is weaker than Samsung (LON:0593xq)'s second-quarter operating profit of 10.44 trillion won. Consolidated sales are expected at 79 trillion won, up from 67.4 trillion won last year and 74.07 trillion won in the prior quarter. Samsung is racing to catch up with smaller rivals SK Hynix Inc (KS:000660) and Micron Technology Inc (NASDAQ:MU) in producing advanced memory chips for use in AI applications. While demand from the AI industry has boosted sales of its memory chips, especially those used in servers and data centers, Samsung has been grappling with slower demand for chips used in personal devices. This trend has weighed heavily on sales of Samsung's conventional DRAM chips, as has competition from foundries in China.

Samsung Results Disappoint as AI Chip Gap With Rivals Persists

Samsung Electronics Co. posted profit and revenue that fell short of market expectations, stoking uncertainty about the outlook of its pivotal chip division. The world's biggest maker of memory chips and smartphones reported preliminary operating profit of around 9.1 trillion won ($6.8 billion) in the September quarter versus the 11.5 trillion won projected. Revenue came to 79 trillion won, compared with expectations for 81.57 trillion won. Samsung plans to provide a full financial statement with net income and divisional breakdowns later this month.

Samsung confirms there are no plans to sell foundry business, issues apology over missed profits

Serving tech enthusiasts for over 25 years. TechSpot means tech analysis and advice you can trust. What just happened? Most companies would be pretty happy to report an expected quarterly operating profit of $6.78 billion, but not Samsung Electronics. The Korean technology giant has missed analyst expectations by about $900 million, leading the firm to issue an apology to its customers, investors, and employees. While Samsung remains the world's leading memory chip manufacturer, it is facing increasing competition from rivals. "We have caused concerns about our fundamental technological competitiveness and the future of the company due to our performance falling short of the market's expectations," wrote Samsung Vice Chairman Jun Young-hyun. "Many people are talking about Samsung's crisis. We, who are leading the business, are responsible for all of this." Thanks to the AI wave, Samsung saw its operating profits jump almost 933% in the first quarter, a result of the surge in memory chip prices that remain in demand by AI companies looking for more hardware to power their systems. The second quarter was even better, with a 15x increase in Samsung's profits. Samsung estimates an operating profit of 9.1 trillion won ($6.78 billion) for the three months ended September 30, which is up 274.5% from the same period last year. However, the amount falls short of the 10.3 trillion won LSEG SmartEstimate. Samsung's Device Solutions (DS) division, responsible for semiconductor operations, saw its performance decline during the quarter, though that was due to one-off costs, including incentive provisions. Mobile division earnings were up, as were those at Samsung's display unit. Samsung said that sales of its high-end HBM3E chips to a major customer have been delayed, contributing to the decline in earnings. One analyst told Reuters that Samsung is lagging behind SK Hynix in increasing sales of HBM chips to Nvidia. Samsung is also feeling pressure from Chinese memory manufacturing rivals who have increased supplies of chips to devices such as smartphones. There's also the world's second-most valuable semiconductor company, Taiwanese giant TSMC, which Samsung is increasingly struggling to compete against. Earlier this week, Samsung Electronics Chairperson Jay Y. Lee told Reuters that despite rumors, the company is not interested in spinning off its contract chip manufacturing business or its logic chip designing operation. Analysts say Samsung designing and manufacturing chips for other clients is resulting in billions of dollars of losses due to weak demand and dragging down overall performance. Lee wants to overtake TSMC as the world's largest contract chipmaker by 2030. Samsung introduced a six-day workweek policy for executives earlier this year in a bid to overcome a chip "crisis" at the company. It also replaced the chief of its semiconductor division, and is cutting up to 30% of its overseas staff in some divisions.