South Korean tech giant Samsung Electronics has apologized to shareholders after a weak 2024, marked by declining market share in all core businesses.
At its annual meeting held on March 19 in Suwon, South Korea, nearly 900 individual and institutional investors expressed disappointment at the Korean tech giant's nearly 20% drop in share price in 2024.
A "survival" warning
Despite a boom in global demand for artificial intelligence (AI) hardware that is generating huge profits for its competitors, Samsung Electronics is entering an unprecedented period of difficulty.
During the meeting, CEO Han Jong-hee admitted to shareholders that Samsung's technological competitiveness has weakened in recent years.
To salvage the situation, he pledged that the company would pursue "meaningful achievements" in mergers and acquisitions (M&A) in 2025 as a way to restore growth.
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CEO Han Jong-hee at Samsung's annual meeting. Photo: Reuters. |
"M&A in the semiconductor sector is difficult due to regulations and national interests, but we are determined to achieve concrete results this year," Mr. Han said.
Investors' frustration is understandable as Samsung has seen a worrying decline in market share in many key areas.
According to the newly released annual report, Samsung's market share in the DRAM memory chip segment has dropped from 42.2% to 41.5%, while its smartphone market share has dropped from 19.7% to 18.3%.
Notably, the smartphone panel manufacturing sector recorded the sharpest decline, from 50% to just 41.3%. In addition, pressure from Chinese competitors also caused Samsung's TV market share to drop from 30.1% to 28.3%.
Even the automotive technology products division of subsidiary Harman saw its market share decline from 16.5% to 12.5%.
In that context, Samsung Chairman Lee Jae-yong sent an urgent message to thousands of senior leaders of the group.
He stressed that Samsung is facing an existential crisis, which means either changing to survive, or accepting failure.
In the recording, Chairman Lee emphasized: "Samsung is facing a life-or-death problem. We need to deeply reflect on ourselves from the top. We must invest in the future, even if it means sacrificing short-term profits."
Samsung's "swamp"
One of the biggest concerns for investors is Samsung's lag in advanced high-bandwidth memory (HBM) chips, a key component of AI hardware.
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Samsung is being surpassed by competitors in the AI chip segment. Photo: Reuters. |
HBM is essentially a stack of memory chips with small components that store data. They can store more information and transfer data faster than dynamic random access memory, or DRAM.
With this advantage, HBM chips are often used in graphics cards, high-performance computer systems, data centers, and autonomous vehicles.
Most importantly, HBM is an indispensable component for running increasingly popular artificial intelligence applications, including generative AI with support from Nvidia's graphics processing units (GPUs).
"Processors and memory are two essential components of AI. Without memory, it's like having a brain that has logic but no memory capabilities," Dan Hutcheson, vice president of TechInsights, a chip research organization, told CNN .
Unlike its two peers SK Hynix and Micron Technology, Samsung has yet to partner with Nvidia to produce HBM chips.
One of the reasons Samsung fell behind was its decision to stick with “non-conductive film” (NCF) chip manufacturing technology, which caused the company some production problems.
Despite restructuring its engineering team to boost HBM's competitiveness, the South Korean tech giant has yet to pass the quality tests needed to supply products to AI chip giant Nvidia.
Samsung’s foundry business is also struggling. Low production rates in advanced manufacturing processes, coupled with fierce competition from TSMC and Chinese companies, have caused the division to suffer losses of more than 1 trillion won per quarter.
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Chairman Lee also called on the company to continue investing heavily in the future, even if it means sacrificing short-term profits. Photo: Bloomberg. |
Although Samsung has announced plans to invest heavily in an advanced chip factory in Texas, US, analysts have expressed concerns that the project could become a "stranded asset" due to a lack of customers.
The Financial Times quoted an internal source as saying that Samsung's foundry operations are falling into a "vicious cycle" as low product quality at its US factory makes it difficult to attract large orders.
To cope with these challenges and find new growth drivers, the South Korean tech giant has pledged to expand investments in areas such as robotics, medical technology and next-generation semiconductors for AI.
More importantly, Samsung also expects the recovery of the memory chip market in the second half of this year to help improve profits.
Source: https://znews.vn/ceo-samsung-xin-loi-hua-tim-giai-phap-vuot-qua-giai-doan-song-con-post1539322.html
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