Just a few months ago, Samsung Electronics Co looked primed to benefit from the global artificial intelligence (AI) boom: profits were surging and its stock was rising toward an all-time high.
Now, South Korea’s biggest company has become a stark example of how quickly fortunes can turn in an industry where the spoils go to those who maintain a technological edge.
As concerns mount that the company is losing out to smaller rival SK Hynix Inc in AI memory and failing to gain on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in outsourced chipmaking, Samsung shares have tumbled 32 percent from this year’s peak on July 9. The company has lost US$122 billion of market value in that span, more than any other chipmaker worldwide.
Photo: AP
Samsung has promised an overhaul to regain competitiveness, but international money managers including Pictet Asset Management Ltd and Janus Henderson Investors SP Ltd are unconvinced a turnaround is imminent. Overseas investors have sold about US$10.7 billion worth of the South Korean company’s shares on a net basis since the end of July.
“We have more than halved our position in Samsung over the last few months — it was the largest position in our strategy in July,” said Sat Duhra, a portfolio manager at Janus Henderson Investors SP in Singapore. While Duhra said the shares have fallen to an attractive valuation, he has “no intention” to buy them for now.
Smartphones and other consumer electronics still account for the biggest share of Samsung’s sales, but semiconductors have been contributing the most profit in recent years. With the recent crisis in its chip business, the Suwon-based company issued a rare apology to investors earlier this month for disappointing results.
The company’s story highlights how AI is the key factor minting winners and losers in today’s chip sector. While foreign investors have led an exodus from Samsung, Nvidia Corp has become one of the world’s largest companies. TSMC, the key maker of chips designed by Nvidia and Apple Inc, has added over US$330 billion in market value this year.
Things went south for Samsung quickly. Its stock flirted with a record high after it posted a 15-fold surge in operating profit for the June quarter. As recently as August, investors were optimistic it could win more business supplying Nvidia with high-bandwidth memory (HBM) chips to work alongside AI processors.
That hope has been snuffed out with the company admitting delays with its latest-generation HBM chips earlier this month, soon after SK Hynix said it had begun volume production. Meanwhile, US rival Micron Technology Inc is stepping up efforts in HBM as well, and has reported strong demand for its offerings.
Samsung is “losing its technology leadership in the semiconductor business,” said Lee Young-jae, London-based senior investment manager of the global emerging markets high-dividend team at Pictet Asset Management Ltd.
“Technology leadership is difficult to regain in the short term by nature,” he said, adding that the firm has been reducing its Samsung holding.
Beyond its lag in AI memory, Samsung has struggled with a costly, yearslong effort to close the gap with TSMC in foundry business. Like Intel Corp — which has run into similar difficulty with plans to expand its outsourced chipmaking operations — the South Korean firm is now moving to cut jobs and make other efforts to stop the bleeding.
Samsung is holding a conference call today after it releases detailed third-quarter earnings. Among points to watch is an expected management reshuffle before the end of the year, amid ongoing uncertainty over company leadership.
Jay Y. Lee — a grandson of Samsung’s founder who was appointed executive chairman two years ago — was acquitted of stock manipulation charges in February after years of legal issues. Three months later, the company unexpectedly replaced its semiconductor division head with Jun Young-hyun, a memory chip veteran.
Management might have its work cut out for it in trying to win back investors, even with stock valuations near a record low and technical indicators flashing oversold signals.
“We don’t see much is changing with the Samsung executives and engineers are leaving the company,” said Park Jin-ho, head of equity investment at NH-Amundi Asset Management Co in Seoul. Park reduced Samsung to underweight from neutral at the end of the second quarter and added SK Hynix instead.
SEMICONDUCTORS: The German laser and plasma generator company will expand its local services as its specialized offerings support Taiwan’s semiconductor industries Trumpf SE + Co KG, a global leader in supplying laser technology and plasma generators used in chip production, is expanding its investments in Taiwan in an effort to deeply integrate into the global semiconductor supply chain in the pursuit of growth. The company, headquartered in Ditzingen, Germany, has invested significantly in a newly inaugurated regional technical center for plasma generators in Taoyuan, its latest expansion in Taiwan after being engaged in various industries for more than 25 years. The center, the first of its kind Trumpf built outside Germany, aims to serve customers from Taiwan, Japan, Southeast Asia and South Korea,
Gasoline and diesel prices at domestic fuel stations are to fall NT$0.2 per liter this week, down for a second consecutive week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) announced yesterday. Effective today, gasoline prices at CPC and Formosa stations are to drop to NT$26.4, NT$27.9 and NT$29.9 per liter for 92, 95 and 98-octane unleaded gasoline respectively, the companies said in separate statements. The price of premium diesel is to fall to NT$24.8 per liter at CPC stations and NT$24.6 at Formosa pumps, they said. The price adjustments came even as international crude oil prices rose last week, as traders
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which supplies advanced chips to Nvidia Corp and Apple Inc, yesterday reported NT$1.046 trillion (US$33.1 billion) in revenue for last quarter, driven by constantly strong demand for artificial intelligence (AI) chips, falling in the upper end of its forecast. Based on TSMC’s financial guidance, revenue would expand about 22 percent sequentially to the range from US$32.2 billion to US$33.4 billion during the final quarter of 2024, it told investors in October last year. Last year in total, revenue jumped 31.61 percent to NT$3.81 trillion, compared with NT$2.89 trillion generated in the year before, according to
PRECEDENTED TIMES: In news that surely does not shock, AI and tech exports drove a banner for exports last year as Taiwan’s economic growth experienced a flood tide Taiwan’s exports delivered a blockbuster finish to last year with last month’s shipments rising at the second-highest pace on record as demand for artificial intelligence (AI) hardware and advanced computing remained strong, the Ministry of Finance said yesterday. Exports surged 43.4 percent from a year earlier to US$62.48 billion last month, extending growth to 26 consecutive months. Imports climbed 14.9 percent to US$43.04 billion, the second-highest monthly level historically, resulting in a trade surplus of US$19.43 billion — more than double that of the year before. Department of Statistics Director-General Beatrice Tsai (蔡美娜) described the performance as “surprisingly outstanding,” forecasting export growth
RSS