This will be an important year for Samsung, because the company is not doing too well. Today, Samsung reported a quarterly profit that was significantly lower than expected. According to an analyst, the South Korean company is even going through ‘one of the most difficult phases in its history’. There are several reasons for this.
Samsung made much less profit than expected last quarter. South Korea’s largest company reported operating profit of 6.5 trillion won ($4.5 billion), while analysts on average expected 8.96 trillion. That is a major setback.
We know Samsung for smartphones, televisions and many other gadgets, but the company is also one of the largest suppliers of semiconductors and memory chips. What has gone wrong lately?
Missed the boat with AI chips
An important explanation for the disappointing quarterly figures has to do with the development of new AI chips, which the tech giant is experiencing problems with. Samsung is increasingly lagging behind rival chipmakers such as SK Hynix and Micron in the lucrative AI market. Samsung is struggling to get its latest products certified by Nvidia, the main player in the AI field.
For now, Samsung has missed the boat and competitor SK Hynix has captured a larger share of the market for high-bandwidth memory chips. Those chips are used in AI accelerators. It is a very lucrative market involving many billions. For example, Microsoft announced this week that it will spend as much as $80 billion this year on building data centers full of servers that use new chips.
Chinese headwind
Samsung must therefore counterattack. But catching up in the field of AI chips costs the company a lot of money in research and development costs. A top executive of the chip division recently apologized for the problems. He acknowledged the delays in achieving Nvidia’s certification.
Samsung is also facing a lot of headwinds with memory chips. Chinese manufacturers are flooding the DRAM chip market with dirt-cheap products. Some Chinese DRAM chips cost half of what Samsung charges.
Things are not going well on mobile either. The telephone branch performed less well due to growing competition, especially from Chinese brands such as Huawei. Samsung is also increasingly affected by price competition from Chinese manufacturers in TVs and household appliances.
Difficult times
Analysts are concerned. “Samsung is going through one of the most difficult moments in its history,” said Counterpoint analyst Tom Kang to Bloomberg. “They’re really doing their best to catch up.”
Samsung is one of the oldest companies in South Korea and must now change course. The manufacturer has recently started reviewing its internal processes and organizational culture, according to a top executive. It is also undergoing a major reorganization, which will result in the loss of thousands of jobs.
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Source: www.bright.nl
