Samsung Electronics issued an unusual apology on Tuesday, acknowledging a "crisis" regarding its technological competitiveness, despite the global AI boom. The company revealed that it expected third-quarter profits to reach 9.1 trillion won ($6.8 billion), which represents a 274.5 percent increase from the previous year but falls short of market expectations. In a statement signed by Jun Young-hyun, vice chairman of its device solutions division, Samsung expressed concerns about its fundamental technological competitiveness and the company’s future.
Samsung's management vowed to take decisive steps to overcome this crisis while framing the current challenges as an opportunity for resurgence. Although profits are significantly higher than last year, they are down nearly 13 percent compared to the previous quarter. This apology followed the announcement of planned staff reductions in some Asian operations, described by the company as “routine workforce adjustments.”
Bloomberg reported that layoffs could impact around 10 percent of the workforce in those regions, with other reports suggesting cuts could extend to 30 percent of overseas employees in certain operations. Samsung has experienced challenges in keeping pace with SK Hynix, particularly in the production of high-bandwidth memory (HBM) chips crucial for AI applications, a situation contributing to its disappointing profit forecast, according to analysts.
Reports indicate that Samsung may have lost a significant number of HBM-related employees to SK Hynix, further compounding its struggles. Shares of Samsung fell 1.31 percent during afternoon trading in Seoul, marking a nearly 30 percent decline over the past six months. The company also announced intentions to quickly evaluate and adjust its workplace culture in response to current challenges.
Samsung is a key player in South Korea's economy and the flagship subsidiary of the Samsung Group, the largest family-controlled conglomerate known as a "chaebol." Analysts note a decline in Samsung's memory sector, attributed to delays in supplying new chips and an overall reduction in memory demand. However, a sharp decline in either profit or sales is not considered likely in the immediate future, as Samsung remains integral to the global supply chain.
The firm estimates that its sales for the third quarter will increase 17.2 percent year-on-year, totaling 79 trillion won. Samsung is set to release its final earnings report later this month, which will provide a clearer picture of its financial health amid these challenges.