Samsung.. Below-Expectations Results and Decline in the Artificial Intelligence Race - Shares have Fallen by More than 20% in 2024
Samsung Electronics Co. reported earnings and revenue that fell short of market expectations, raising uncertainty about the outlook for its core chip division.
The world’s largest memory chip and smartphone maker reported preliminary operating profit of about 9.1 trillion won ($6.8 billion) for the quarter ended September, versus an expected 11.5 trillion won.
Revenue came in at 79 trillion won, compared with a forecast of 81.57 trillion won. Samsung plans to file a full financial statement including net income and divisional details later this month.
Samsung shares fall
Samsung shares have fallen more than 20 percent this year as the company struggles in key markets. The company has lagged behind rival SK Hynix Inc. in memory chips used with Nvidia Corp. processors to develop artificial intelligence, and has not shown much progress against Taiwan Semiconductor Manufacturing Co. in producing custom chips made to order.
Analysts have lowered their price targets for Samsung to take into account the difficulties its chip division has faced in recent weeks, with Macquarie Bank downgrading Samsung to “neutral” from “outperform” in a report released on Sept. 25, and cutting its price target on the stock to 64,000 won from 125,000 won.
Memory chip production
Samsung is in a position to catch up with SK Hynix, which has taken the lead in producing high-bandwidth memory chips paired with Nvidia’s AI accelerators.
In contrast, South Korea’s largest company has faced delays in getting approval for its most advanced chip product.
Samsung abruptly replaced the head of its chip division this year, with newly appointed Chairman Joon Young-hyun warning that the company must change its workplace culture or it will fall into a “vicious spiral.”
The company, based in Suwon, South Korea, underperformed other AI stocks and the benchmark Kospi index.
Samsung layoffs
Bloomberg reported last week that the company has begun laying off workers in Southeast Asia, Australia and New Zealand as part of a plan to cut thousands of jobs globally.
The South Korean company has about 147,000 employees outside its home country, more than half of its total of 267,800, according to the company’s latest sustainability report, and Samsung has no plans to lay off workers in its home market.
The company aims to maintain manufacturing jobs while cutting management and support roles.
Samsung has also been grappling with employee disputes in South Korea, where the company’s largest labor union called its first-ever strike in May.
The company has cut its workforce in the past as it works to navigate the memory chip market, which is known for its rapid turnover.
Hazem Abbas
