Samsung Electronics, the world’s largest maker of memory chips and smartphones, is being besieged by rivals big and small, domestic and foreign. When it comes to AI chips, the “big guy” has been overtaken by its compatriot SK Hynix.

SK Hynix, South Korea's second-largest chipmaker, will surpass Samsung's chip unit in full-year operating profit for the first time this year, brokerages predict.

Specifically, SK Hynix's operating profit in 2024 could reach 23.48 trillion won, higher than Samsung's 18 trillion won.

In the first nine months of the year, the operating profits of the two chipmakers were 15.4 trillion won and 12 trillion won, respectively.

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SK Hynix's 2024 operating profit is expected to surpass Samsung Electronics' chip division. Photo: Yonhap

SK Hynix dominates the market for high-bandwidth memory (HBM) chips used in AI chips. They are Nvidia's sole supplier of HBM.

Meanwhile, Samsung is still waiting for the world's largest semiconductor company to approve the quality of its HBM chips.

Lee Jong-hwan, professor of system semiconductor engineering at Sangmyung University, commented that the losses in the HBM and foundry segments were “too bad.”

“Wrong decisions by executives are considered one of the leading causes of the current difficulties,” he told the Korea Herald.

Sources told the newspaper that Samsung may undergo a major personnel reshuffle by the end of the year and adhere to the principles of meritocracy. Rumors suggest that about 30% of directors will be cut.

Amid sluggish chip sales, Samsung surprisingly replaced the head of its chip division with a seasoned expert, Vice President Jun Young-hyun, in May.

The chip business is expected to undergo another round of restructuring following the leadership change, sources said.

Earlier this month, Mr. Jun issued a rare apology after reporting weak preliminary business results and hinted at a drastic overhaul of the company's personnel and structure.

“Many of you are talking about Samsung’s crisis. The full responsibility lies with us, the business operators,” Mr. Jun said in a statement.

Foundry chief Choi Si-young and logic chip division head Park Yong-in are expected to be replaced in a year-end reshuffle as the divisions are reporting losses.

Samsung Electronics' board of directors is no exception. Three of its four internal directors will leave in the first half of next year, including Chief Financial Officer Park Hark-kyu, mobile business chief Roh Tae-moon and Lee Jung-bae, another director at the memory chip business.

As of the second quarter, the semiconductor business had 438 directors, accounting for 38% of Samsung's total 1,164 directors, more than double that of SK hynix with 199 directors.

Experts say Samsung should also restructure its corporate culture, which focuses heavily on operational efficiency and immediate results, often at the expense of long-term progress.

This prevents the company from achieving the necessary production expansion.

According to Professor Lee, Samsung's top priority should be to ensure technical leadership. Because leaders need to demonstrate immediate effectiveness, they often make decisions based on short-term benefits.

Engineers come up with new ideas without considering the yield rate. When only 20 out of 100 units work properly, it cannot be called a success.

Hwang Yong-sik, a professor at Sejong University's College of Business and Economics, stressed that companies should give more power to engineers and appoint strategists to steer the company in the right direction.

“In the past, Samsung focused on creating a favorable environment for engineers. Now, it is important for the company to find the right direction through the synergy created between engineers and strategists,” Hwang said.

(According to Korea Herald, Yonhap)