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Samsung Faces Semiconductor Struggles: Layoffs Loom Amid AI Market Misses

AInvestThursday, Oct 10, 2024 12:00 pm ET
1min read

Recent reports have cast a spotlight on Samsung Electronics' semiconductor division, which is reportedly facing significant challenges linked to underwhelming performance and impending layoffs. The South Korean tech giant disclosed its Q3 2024 preliminary earnings, indicating lower-than-expected figures, further intensifying market concerns.

Samsung's semiconductor division's operating profit for the third quarter was projected at approximately 9.1 trillion won, missing analysts' estimates closer to 11.5 trillion won. The company attributes these results partially to increased one-time costs and missed opportunities in the burgeoning AI chip market. The division’s struggles have been compounded by issues within wafer foundry operations and delays in high-bandwidth memory (HBM) chip production.

The looming layoffs are reportedly part of a global cost-cutting strategy, potentially impacting up to 30% of staff in regions such as the Americas, Europe, Asia, and Africa. This move aims to streamline operations in response to the sector's sluggish performance and the anticipated market downturn.

Samsung Vice Chairman Jun Young-hyun issued a rare apology, acknowledging the missed market expectations and expressing concerns over the company's core technological competitiveness. He pledged to revamp the division's strategy, focusing on strengthening foundational technology and preparing for future innovations.

In contrast, competitor SK Hynix has reported robust stock performance, buoyed by advancements in the AI realm and successful HBM developments. This divergence between the two firms highlights different market expectations and competition dynamics within the semiconductor industry.

Samsung is now expected to undertake significant organizational restructuring, with a renewed emphasis on pushing for technological leadership and efficiency. The outcomes of this strategic refocus will be crucial in shaping the company’s ability to reclaim its position as a global leader in the semiconductor space.

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