Samsung’s ongoing ambitions in the semiconductor sector continue to face substantial hurdles, even as the company prepares to announce a stronger financial performance for Q3 2024.
Though profits are up, persistent issues in its chip manufacturing and logic chip design divisions are putting pressure on the South Korean company. Chairman Jay Y. Lee has confirmed that Samsung is not considering splitting off these businesses, despite growing speculation and reported losses.
Samsung’s Chip Struggles Continue Amid Profit Growth
The company’s quarterly profit is expected to rise, with analysts forecasting a figure of KRW10.33 trillion ($7.67 billion) for Q3 2024. Such are result would mark an increase compared to the KRW2.43 trillion from the same period last year. However, this growth is dampened by ongoing challenges in the chip sector, particularly in the production of AI chips and contract chip manufacturing, also known as foundry services.
While Samsung has invested heavily in expanding its presence in this market, it has struggled to capture major orders from leading companies. Despite these investments, the company’s foundry and system LSI businesses have continued to lose money. Last year alone, these operations saw a combined operating loss of KRW3.18 trillion ($2.4 billion), and forecasts suggest that losses will persist through this year.
Efforts to Compete in the AI Chip Market Falter
A large part of Samsung’s difficulties comes from its delayed push into AI chips. While demand for these high-performance chips has surged in recent years, with companies like Nvidia and Apple leading the charge, Samsung has lagged behind its competitors. The gap between Samsung and rival manufacturers such as SK hynix and Micron Technology remains considerable, especially as the AI boom shows signs of slowing.
Samsung’s late entry into the AI chip space, coupled with increasing competition from Chinese semiconductor makers, has left the company at a disadvantage. Meanwhile, demand for more traditional memory chips used in smartphones and computers has started to decline, adding further pressure on the company’s bottom line.
Although, Samsung does have plans to enter the GPU market, signaling the company continues to focus on expansion of its chip business. The company’s Exynos System on Chips (SoCs) already incorporate GPUs, with the latest Exynos 2400 featuring an Xclipse 940 GPU rooted in AMD’s RDNA 3 architecture.
Korean outlets reports that Samsung plans to launch an Exynos chip in 2025 outperforming Qualcomm’s counterparts, with a Samsung-designed GPU potentially debuting in 2026’s Exynos lineup.
Delays in Texas Plant Construction Complicate Expansion Plans
Part of Samsung’s strategy to catch up in the chip sector involves building new manufacturing plants, including a high-profile facility in Taylor, Texas. However, the project has been delayed, with the start of production now pushed back to 2026 from its original target of late 2024. According to Chairman Jay Y. Lee, the delay is due to evolving market conditions and the impact of the U.S. presidential election, though he did not go into further detail.
The postponement of the Taylor plant adds another layer of complexity to Samsung’s chip ambitions. The company had hoped the new facility would play a central role in its plan to overtake TSMC, the global leader in contract chip production, by 2030. With production now delayed, Samsung faces an even tougher path forward in an industry where speed and capacity are critical to success.
Mobile and Network Divisions Face Slowdown
While Samsung’s chip business faces challenges, the company’s mobile and network units are also feeling the squeeze. Analysts expect these divisions to report an operating profit of KRW2.6 trillion for Q3 2024, representing a 20% drop compared to the previous year. This decline is largely driven by weakening demand for smartphones and network equipment, as global economic uncertainties weigh on consumer spending.
Additionally, reports have surfaced that Samsung is cutting up to 30% of its overseas workforce in certain divisions, highlighting the company’s efforts to reduce costs amid ongoing difficulties in various sectors.
Last Updated on November 7, 2024 2:38 pm CET
