The South Korean tech giant Samsung Electronics announced that it expects to close the third quarter with profits that are up sharply, but lower than expected. The news has weighed down the MY BAG of South Korea which closed at -0,46%, with the Samsung Electronics title which lost 1,5%, also contaminating its Italian counterpart St Microelectronics that loses in the morning at Piazza Affari 0,85%.
In its latest guidance, Samsung reported third-quarter operating profit of 9,10 trillion won ($6,78 billion), 274% more compared to last year's results (when it closed at 2,43 trillion won) but lower than that indicated in the analysts' expectations. The latter, in fact, had predicted a operating profit of 11,456 trillion won (US$8,5 billion) based on revenue of 81,96 trillion won (about US$61 billion). revenues stopped at 79 trillion won ($58,6 billion).
Management's Apologies and a Three-Point Restart
The top management of Samsung, in clear Asian style, apologizes and is ready to take full responsibility for the results below expectations. “Dear customers, investors and employees who have always loved Samsung Electronics. Today, the management of Samsung Electronics would like first and foremost to apologize to you“, begins the letter signed by Jun Young-hyun newly appointed head of the core semiconductor business. “We have raised concerns about our core technological competitiveness and the future of the company because of our performance below market expectations. Many talk about the crisis of Samsung. We, who are at the helm of the company, are responsible of all this."
The vice president recalls however that "Samsung, however, has always transformed crises into opportunities, having a history of challenges, innovation and victories. We will make the difficult situation we are facing become an opportunity to make a qualitative leap. Our management will take the initiative to overcome the crisis.”
The executive says that Samsung will first have to restore technological competitiveness and quality, focusing on "technologies that do not exist in the world". In according to place, the aim is to rekindle the sacred fire of passion within the company, changing its mindset.
"Third, we will re-examine our organizational culture and our working methods and immediately fix what needs fixing. We will rebuild our traditional organizational culture of trust and communication. If we find problems on the ground, we will expose them as they are and have lively discussions to improve them. In particular, we will actively communicate with our investors whenever we have the opportunity.” “If we challenge ourselves, we are confident that we can turn the current crisis into a new opportunity. Please give us your support and encouragement so that Samsung Electronics can once again demonstrate its strength,” concluded Vice President Jun Young-hyun.
In another document, Korea's largest company confessed its delays in delivery of a key type of chip used with Nvidia's processors for training artificial intelligence, these problems have allowed rival SK Hynix to dominate the arena of so-called high-bandwidth memories.
President Lee: “No Spin-Off Coming”
Samsung has given its subsidiaries around the world the mandate to reduce staff by 30% in some divisions. In recent days, there were also rumors of a possible spin-off of the contract manufacturing business. But on this point the president has made it clear: despite the disappointing data, Samsung Electronics does not want any spin-off of the chip factories. President Jay Y. Lee, in an interview with Reuters, was clear: no split is planned – he said – of this branch of the company or of the one related to the design of processors. On the contrary, it would like to reduce its dependence on memory chips to expand precisely in the market of processors, which are essential for data processing. In 2019, President Lee had set an ambitious goal in this field: to overtake the Taiwanese giant Tsmc, the current leader in the sector.
To do this, Samsung has planned billion-dollar investments that include new plants in South Korea and the United States. However, according to Reuters the company would struggle to get enough orders to fill the capacity of the new factories. Meanwhile, the schedule for the installation of the new factory in Texas has been revised, moving the start of production from late 2024 to 2026.