Just a few months ago, Samsung Electronics Co. seemed determined to capitalize on the global AI boom: Profits were soaring and its stock was heading for all-time highs. Now, South Korea’s largest company has become a stark example of how quickly fortunes can change in an industry where the spoils go to those who maintain a technological edge.
As concerns grow that the company may outpace smaller rival SK Hynix Inc. in AI memory. Losing to and failing to catch up with Taiwan Semiconductor Manufacturing Co. in outsourced chipmaking, Samsung’s shares have fallen 32 percent from this year’s peak on July 9. It lost $122 billion in market value over that period, more than any other chipmaker worldwide.
Samsung has promised an overhaul to regain competitiveness, but international money managers including Pictet Asset Management Ltd. and Janus Henderson Investors SP Ltd. Not convinced that change is imminent. Foreign investors have sold about $10.7 billion worth of shares in the South Korean company on a net basis since the end of July.
“Over the past few months we’ve cut our position in Samsung by half — it was the largest position in our strategy in July,” said Sat Dohra, portfolio manager at Janis Henderson Investors SP in Singapore. While Dehra said the shares have fallen to an attractive price, he currently has “no intention” to buy them.
Fast fading
Smartphones and other consumer electronics still account for most of Samsung’s sales, but semiconductors have been contributing the most to profits in recent years. With the recent crisis in its chip business, the Suwon-based company earlier this month issued a rare apology to investors for disappointing results.
The company’s story highlights how AI is the key factor for winners and losers in today’s chip sector. While foreign investors have led the withdrawal from Samsung, Nvidia Corp. It has become one of the largest companies in the world. Nvidia and Apple Inc. TSMC, the key maker of chips designed by , added more than $330 billion in market value this year.
Things quickly went south for Samsung. Its stock soared to record highs after a 15-fold increase in operating profit for the June quarter. As recently as August, investors were optimistic that it could win more business by supplying Nvidia with high-bandwidth memory to work with AI processors.
The company dashed that hope by admitting to delays with its latest-generation HBM chips in early October, shortly after SK Hynix said it had begun volume production. Meanwhile, U.S. rival Micron Technology Inc. is also ramping up efforts at HBM, and has reported strong demand for its offerings.
Samsung is “losing its technology leadership in the semiconductor business,” said Young Jay Lee, London-based senior investment manager of global emerging markets high-dividend team Packet Asset Management. “Technology leadership by nature is difficult to regain in the short term,” he said, adding that the firm was reducing its Samsung holdings.
Administrative issues
Beyond its foray into AI memory, Samsung has struggled with a costly, years-long effort to close the gap with TSMC in the foundry business. Like Intel Corp. — which has faced similar problems with plans to expand its outsourced chipmaking operations — the Korean firm is now moving to cut jobs and make other efforts to stem the bleeding.
Samsung is holding a conference call on Thursday after releasing detailed third-quarter earnings. A management shake-up is expected before the end of the year amid ongoing uncertainty over the company’s leadership.
Jay Lee — the grandson of the Samsung founder who was appointed executive chairman two years ago — was acquitted of stock manipulation charges in February after years of legal trouble. Three months later, the company unexpectedly replaced the head of its semiconductor division with Joon Young-hyun, a memory chip veteran.
Management may have its work cut out for it in trying to win back investors, even as stock prices hit record lows and technical indicators flash oversold signals.
NH-Amundi Asset Management Co. in Seoul. “We don’t see much change with Samsung’s executives and engineers leaving the company,” said Park Jinho, head of Equity Investments. Park downgraded Samsung from neutral at the end of the second quarter and added SK Hynix instead.
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