SEOUL: Samsung Electronics, the world’s largest memory chipmaker, is confronting a pivotal period marked by intense competition and internal challenges, as rival Taiwan Semiconductor Manufacturing Company (TSMC) continues to thrive in the AI semiconductor sector. TSMC recently announced a remarkable 54.2 percent increase in net profit for the third quarter, leveraging its strong position in AI chip manufacturing. Its market capitalization has soared to $1.67 trillion, aligning it with companies like Nvidia that have surpassed the $1 trillion mark.
According to Yonhap News Agency, Samsung has struggled to meet market expectations, especially regarding its operating profit, leading to public apologies from its executives. The company’s stock price has declined to approximately 59,000 won ($43) per share, with foreign investors steadily selling off their holdings since early last month. This downturn reflects broader apprehensions about Samsung’s ability to sustain its leading position in an increasingly compet
itive landscape.
The escalating international chip war has intensified competition among countries, placing Samsung in a challenging position as demand for its primary product, DRAM chips, declines. Concerns are rising about a potential “semiconductor winter,” a period of economic downturn in the memory chip industry. Chinese companies are rapidly advancing in the semiconductor sector, with Morgan Stanley forecasting a downturn in the memory sector due to waning demand for conventional DRAM and a potential oversupply of high bandwidth memory (HBM). Chinese manufacturers, such as CXMT, are expected to produce over 10 percent of the world’s DRAM this year, challenging the traditional dominance of Samsung, SK hynix, and Micron.
The implications of this crisis are particularly severe for Korea, where the chip industry is crucial to the export-driven economy and national security. Major powers, including the U.S. and China, are bolstering their chip industries through extensive subsidies and regulatory measures.
In response, the Yoon Suk Yeol administration has introduced measures to support the domestic semiconductor sector, but industry insiders argue these efforts are insufficient, offering only indirect assistance like low-interest loans rather than addressing the industry’s fundamental needs.
Historically, Samsung has excelled through bold investments and cutting-edge technology. However, the current crisis underscores an urgent need for introspection and reform within the company. Analysts highlight internal factors as significant contributors to its struggles, with Samsung adopting a cautious approach focused on cost-saving rather than innovative strategies. Critics within the company’s labor unions have expressed concerns about a leadership culture favoring individual gain over collective progress, describing the management style as authoritarian and lacking long-term vision.
In a recent public letter, Jun Young-hyun, head of Samsung’s chip division, acknowledged the company’s shortcomings, stating, “We hav
e triggered concerns about our technical competitiveness with some forecasting the possible crisis facing Samsung.” However, mere acknowledgment is not sufficient. Samsung needs a comprehensive strategy to navigate this crucial period.
To regain its competitive edge, Samsung’s chairman, Lee Jae-yong, must articulate a new vision for the company, reminiscent of his father, Lee Kun-hee’s leadership style. The focus must shift towards developing state-of-the-art technology and attracting high-quality talent. Emphasizing long-term innovation over short-term performance will be crucial in securing Samsung’s position as a leader in the semiconductor industry.
The challenges facing Samsung Electronics are multifaceted, encompassing fierce competition, shifting market demands, and internal inefficiencies. As the semiconductor landscape evolves, Samsung must undertake drastic reforms and embrace a bold approach to innovation. The stakes are high not just for the company but for Korea’s economy as a whole. Without de
cisive action and visionary leadership, Samsung risks losing its status as a global semiconductor powerhouse.