On October 8, Samsung Electronics announced its guidance for the third quarter of 2024 ending September 30. As the operating profit was lower than market expectations, Samsung Electronics executives issued a statement apologizing and proposing countermeasures.
As the global AI wave continues to drive up the demand for GPU chips for training large models, advanced HBM storage systems, which are critical to GPU hardware architectures, are also in short supply. However, disappointing guidance from investors further confirmed speculation that the world's largest memory chip maker may not have taken advantage of the surge in demand for HBM.
Performance Falls Short of Expectations Executives Rarely Apologize
Samsung Electronics expects to achieve sales of about 79 trillion won (about 413.2 billion yuan) in the third quarter of this year, a year-on-year increase of 17.21%; The operating profit was about 9.1 trillion won (about 47.6 billion yuan), a year-on-year increase of 274.49% and a month-on-month decrease of 12.8%.
While both earnings figures grew year-on-year, Samsung Electronics' sales and operating profit were widely expected to be 80.87 trillion won and 10.3 trillion won, respectively.
In response to results that fell short of market expectations, Samsung said in a statement that its memory division had seen a decline due to "one-time costs and negative impacts," which included inventory adjustments for mobile phone customers and increased supply of traditional products from competitors. Samsung also mentioned that its shipments of high-bandwidth memory HBM3E chips to major customers have also been delayed.
At the same time as the earnings guidance was released, Jeon Young-hyun, vice chairman and head of the Device Solutions Division of Samsung Electronics, issued a rare apology statement.
"The results that fell short of market expectations have raised concerns about Samsung Electronics' fundamental technological competitiveness and the company's future, and many people are talking about Samsung's crisis," Chun said. As the management of Samsung Electronics, we take responsibility for all of this and apologize to our esteemed customers, investors, and employees. ”
How to turn a crisis into an opportunity? Jun Young-hyun proposed three major initiatives: First, Samsung Electronics will restore the fundamental competitiveness of technology, not short-term solutions, and technology and quality are the lifeblood of Samsung. Second, we will prepare more thoroughly for the future and open up the future towards higher goals, rather than having a defensive mentality. Third, we will re-examine our organizational culture and ways of working, and address issues as soon as they need to be addressed.
Samsung Electronics "stepping into the air" wave of artificial intelligence?
The disappointing guidance further confirmed market speculation that Samsung Electronics had failed to profit from the current AI boom. This boom is continuing to drive demand for high-end memory chips such as cutting-edge process chips and HBM.
Samsung Electronics is the world's largest manufacturer of memory chips, which are mainly used in devices such as mobile phones, laptops, and servers. The global semiconductor market is gradually recovering from the downturn, and the demand for chips for AI servers is an important driver. Samsung Electronics' competitors, SK hynix, Micron, and others have benefited from considerable growth in demand for HBM, data center DRAM, and NAND.
According to reports, in the foundry business, Samsung's wafers have not been able to get foundry orders from AI chip manufacturers such as Nvidia due to the yield of cutting-edge processes. In the memory chip business, Samsung Electronics is also striving to become one of the latest generation HBM3E suppliers of NVIDIA Hopper architecture and Blackwell architecture GPUs. However, its progress in high-end HBM chips has been slow, far behind SK hynix.
Earlier this year, Samsung Electronics announced its foray into the AI processor market, with the launch of the Mach-1 AI acceleration chip in early 2025. The move is seen as an important step in its AI strategy. In this strategy, Samsung Electronics has avoided the data center server market occupied by Nvidia and instead targeted the edge computing field, including smart devices such as mobile phones and PCs, self-driving robots, and IoT devices. According to its schedule, the chip will be mass-produced in the second half of this year, delivered by the end of this year, and delivered an inference server based on the chip in the first quarter of next year.