The South Korean tech giant's profit growth is slowing down despite a surge in demand for memory chips. Samsung is facing increased competition in the AI chip market and is vulnerable to geopolitical risks and fluctuating demand.
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| Samsung Electronics reports a significant increase in quarterly profit, driven by the rebound in the semiconductor market. However, the company's recovery is facing challenges as it struggles to capitalize on the growing AI market and compete with rivals. Symbolic image |
Seoul, South Korea - October 7, 2024:
Samsung Electronics is set to report a significant increase in quarterly profit, driven by growing demand for memory chips. However, the company's recovery is facing headwinds as it struggles to capitalize on the burgeoning artificial intelligence (AI) market.
The South Korean tech giant's operating profit for the third quarter is expected to surge over fourfold compared to the previous year. This is largely attributed to the rebound in the global semiconductor market, fueled by demand for AI chips. Despite this positive trend, analysts caution that Samsung's recovery is losing momentum.
One of the key challenges for Samsung is its slow response to the high-margin AI chip market. While smaller rivals like SK Hynix and Micron have been more aggressive in supplying AI chips to companies like Nvidia, Samsung has been playing catch-up. Additionally, the company's reliance on traditional mobile chips and its exposure to the Chinese market make it vulnerable to geopolitical risks and fluctuating demand.
Samsung's chip division, which is a major contributor to its profits, is expected to see a decline in operating profit compared to the previous quarter. This is partly due to provisions for bonuses and increased competition from Chinese rivals in the commodity chip market.
The company's non-memory chip business, which includes chip design and contract manufacturing, is also struggling to compete with industry leader TSMC. As a result, Samsung has been implementing cost-cutting measures, including layoffs, to improve its profitability.
The smartphone market is also posing challenges for Samsung. While the company's premium foldable phones have gained traction, they have not been able to offset the declining sales of its traditional smartphones. Increasing competition from Chinese rivals like Huawei has further impacted Samsung's mobile business.
In conclusion, while Samsung's profit recovery is promising, it is facing significant hurdles in the form of intense competition, market uncertainties, and its own strategic challenges. The company's ability to navigate these challenges will determine its long-term success in the rapidly evolving tech landscape.