Samsung has published an open letter to its customers, investors, and employees, apologising for its third quarter (Q3) earnings falling below market expectations. The electronics giant reported a consolidated operating profit of KRW9.1 trillion ($6.64bn), missing analysts’ prediction of KRW10.33 trillion ($7.65bn). In addition, the company’s operating profit declined by about 12.8% compared to the previous quarter. Even so, Samsung’s consolidated sales for Q3 2024 are expected to be around KRW79 trillion ($58bn) — a 6% rise compared to Q2 2024.
“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, despite the firm’s consolidated sales for Q3 of $58bn constituting a 6% rise on 2023’s figures. “We will definitely make the dire situation we are currently facing an opportunity for a leap forward. Our management will take the lead in overcoming the crisis. Above all, we will restore our fundamental technological competitiveness.”
Samsung raises doubts about its own future
The firm’s share price, which was already down by over 20% this year, dropped by a further 1.3% following the announcement.
The South Korean company has struggled to keep pace with rivals in supplying high-end chips to Nvidia in the rapidly expanding artificial intelligence (AI) market.
The company, which has held the title of the world’s largest memory chipmaker for over 30 years, highlighted the challenges it has been facing in the open letter. However, Samsung is currently contending with increased competition in both traditional and advanced chip sectors.
Young-Hyun said that the company will strive to improve its basic technological competitiveness to address the challenges, adding that Samsung intends to implement proactive steps to future-proof the business. This includes a review of its organisational culture and processes so as to facilitate immediate intervention on any future challenges.
According to industry analysts, Samsung’s delayed response to the AI chip market has left it more reliant on lower-margin traditional chips, making it vulnerable to increased competition from China and a slowdown in demand for smartphones and PCs. Additionally, the chaebol has struggled to keep up with SK hynix in supplying high-bandwidth memory (HBM) chips to Nvidia.
The company also stated that the start of sales of its HBM3E chips had been delayed for a key customer, although it did not provide further details. In July, Samsung announced plans to begin mass production of these chips during the third quarter.
Earnings in Samsung’s memory chip division were impacted by increased supply of legacy products from Chinese competitors and inventory adjustments by some mobile customers, despite strong demand for HBM and chips used in servers.
Its contract chip manufacturing division, which designs and produces custom chips for other companies, is also expected to have posted a loss in the third quarter. The division continues to face stiff competition from Taiwan Semiconductor Manufacturing Company (TSMC). Samsung plans to release the detailed earnings by the end of this month.
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