Samsung says 'sorry' after its profits fall short amid tech 'crisis'

Samsung Electronics has issued a rare apology and acknowledged facing a "crisis" over its technological competitiveness, reflected in disappointing profit guidance, despite a global AI boom.

The South Korean company said on Tuesday it expected third-quarter profits to rise to 9.1 trillion won ($6.8 billion), up 274.5 percent from a year earlier, falling short of market expectations as the company struggles to leverage robust demand for the chips used in artificial intelligence servers.

"Today, we, the management of Samsung Electronics, would like to first say sorry to you," Samsung said in a statement signed by Jun Young-hyun, the vice chairman of its device solutions division.

It said that "concerns have arisen about our fundamental technological competitiveness and the future of the company" because of the results.

"Our management will take the lead in overcoming the crisis... We will make the serious situation we are currently facing an opportunity for a resurgence."

The results are up around three-fold from the same period last year but down nearly 13 percent from the previous quarter.

Layoffs

The rare apology came about a week after the tech giant said it intended to reduce staff in some of its operations in Asia, describing the move as "routine workforce adjustments".

Bloomberg reported that the layoffs could affect about 10 percent of the workforce in those markets, while other reports claimed the planned move could affect up to 30 percent of overseas employees at some operations.

Samsung has been lagging behind South Korea's SK hynix when it comes to high bandwidth memory (HBM) chips used in AI chipsets, which could be one of the biggest causes of the profit estimate released on Tuesday, said Kim Dae-jong at Sejong University in Seoul.

"Given the circumstances, it appears that Samsung has also lost a significant number of (HBM-related) employees to SK hynix," Kim told AFP.

The company was facing a "grave situation", he said.

Shares in Samsung fell 1.31 percent in afternoon trading in Seoul, with its stock down almost 30 percent over the past six months.

'Expected decline'

The Samsung statement said management would "quickly assess and make any necessary adjustments to our workplace culture."

The firm is the flagship subsidiary of South Korean giant Samsung Group, by far the largest of the family-controlled conglomerates known as "chaebol" that dominate business in Asia's fourth-largest economy.

Jene Park, a senior analyst at Counterpoint Research, said there had been "an expected decline" in Samsung's memory sector, with delays in supply of the newest chips and general reductions in memory demand.

Even so, a sharp profit or sales decline was unlikely in the near future, he said.

"Samsung plays a significant role in the global supply chain," Park said.

The company's estimate for its sales for the third quarter were seen increasing 17.2 percent on-year to 79 trillion won ($59.25 billion).

Samsung is expected to release its final earnings report at the end of this month.