Samsung reported a sharp drop in third-quarter profit, reflecting the South Korean tech giant's difficulty adapting to rapid market changes driven by AI.
This week, Samsung Electronics issued a profit warning for the third quarter of 2024 (ending September 30) estimated at 9.1 trillion won ($6.78 billion), significantly lower than the 10.3 trillion won ($7.66 billion) forecast by analysts. This result shows that Samsung is facing major challenges in the volatile semiconductor market.
The AI âârace changes the technological landscape
Samsung is struggling with delays in its AI chip business with a major customer, believed to be Nvidia, and is facing competition from Chinese rivals in the traditional chip market. Demand for AI-optimized chips is surging, forcing manufacturers to quickly adapt their products.
Companies that specialize in making AI-optimized chips are seeing their market value soar, while traditional semiconductor giants like Samsung and Intel are racing to catch up. The impact of this shift extends beyond the chip industry to smartphones and cloud computing infrastructure.
In the memory chip market â where Samsung dominates â it is also facing strong competition from rival SK Hynix in supplying high-bandwidth (HBM) chips, a key element for AI.
The race to develop AI is intensifying competition between tech hubs such as Silicon Valley, Seoul and Shenzhen, China, potentially reshaping global trade flows for high-tech goods.
Samsung warns that third-quarter profits could fall. Source: Samsung
In the long term, the AI âârevolution is blurring traditional industry boundaries. Cloud service providers are designing their own chips, while chipmakers are expanding into software and services. This development is forcing companies to rethink their business models and competitive strategies.
For the smartphone market, AI is also expected to play a major role in reshaping the premium segment, both in terms of software and hardware. Samsung has a significant advantage due to its in-house chip development, design and manufacturing capabilities to support and scale.
Samsung Vice President Young Hyun Jun has called these âchallenging timesâ and the journey of Samsung and its competitors in adapting to the AI ââwave will shape the future of global technology commerce in the years to come.
