Samsung admits chip business is facing crisis, vows to make a comeback

Jun Young-hyun, the new head of Samsung's Device Solutions (DS) division, which oversees Samsung's chip business, acknowledged the challenges facing the company and vowed to turn them into opportunities. "I feel a great sense of responsibility for the crisis facing the company," Jun said in a message posted on the company's internal homepage on Thursday.

The memory chip business, once the unchallenged No. 1, is facing severe challenges, and our contract manufacturing business is struggling to keep pace with industry leaders. In addition, our system LSI (chip design) division has also encountered significant obstacles.”

Jeon said Samsung Electronics has "accumulated valuable expertise, undergone unconventional research experiences, has an outstanding workforce, and a solid technological foundation built through countless past risks and crises."

“I am confident that if we continue to foster a culture of open communication and discussion, we can quickly overcome this latest adversity.”

Jeon also called for unity among management and employees to maintain Samsung's lead in memory chips. Samsung has faced stiff competition from Micron and SK Hynix over the past few years, with SK Hynix surpassing Samsung in the high-bandwidth memory (HBM) market.

Samsung hopes to become the world's largest HBM supplier. Due to the explosive growth of the AI ​​chip market, the demand for HBM chips is huge.

Jeon Young-hyun posted his job announcement on the company's internal bulletin board, saying, "Samsung's semiconductor business has a 50-year history and has always maintained its No. 1 position. We have acquired unparalleled technological assets by overcoming countless crises and challenges. I believe that we can overcome the current challenges by leveraging the accumulated strengths and cultivating a culture of communication and dialogue unique to the semiconductor industry."

Samsung Electronics' largest labor union, which represents 22% of the total workforce, or 28,000 people, has decided to strike next week over unmet wage demands. This will be the first strike in Samsung's history and is seen as a huge challenge.

Jeon did not mention the impending strike, but he acknowledged the tireless efforts of employees and stressed that he and the management team felt a deep sense of responsibility for this challenging situation.

Quan also highlighted the golden opportunities that the era of artificial intelligence brings to the semiconductor business and reiterated his commitment to seize this opportunity by charting the right path.

Samsung Electronics’ semiconductor business lost nearly 15 trillion won ($10.9 billion) last year, signaling a slower-than-expected recovery after one of the industry’s worst cyclical downturns. The company faces stiff competition from local rival SK Hynix in high-bandwidth memory chips and is struggling to narrow the gap with TSMC in contract manufacturing.

Last week, the company carried out a rare mid-year executive reshuffle, replacing previous leader Kyung Kye-hyun, highlighting the urgent need to turn around the semiconductor business.

Behind Samsung Semiconductor's Turmoil

Samsung Electronics has suddenly replaced the leadership of its semiconductor business, a move seen as a personnel adjustment aimed at overcoming the complex crisis facing the semiconductor business.

On May 21, Samsung Electronics announced the appointment of Jeon Young-hyun, head of the Future Business Planning Group (Vice Chairman), as the new head of the Device Solutions (DS) division. Kyung Kyu-hyun, the former head of the DS division, has been transferred to the position of head of the Future Business Planning Group.

Samsung announced the unexpected news of "one point" about half a year before the regular personnel changes because of the crisis within the semiconductor industry. Against the backdrop of the overall downturn in the industry, the semiconductor business lost 15 trillion won last year alone. In addition, the timing of investment in artificial intelligence high-bandwidth memory (HBM) was misjudged, allowing competitors to seize the initiative, and Samsung had to re-formulate its technology gap strategy.

In fact, SK Hynix has been the runner-up in the memory market, and is now catching up with Samsung Electronics with its progress in high-bandwidth memory (HBM), while Intel has also challenged Samsung in the foundry (contract manufacturing of semiconductors). Samsung's position as the first in memory and the second in foundry, which it must defend, is now under threat. In addition, TSMC, the absolute leader in the foundry market, announced that it will start producing "substrates", a key component of HBM, which further shows that Samsung is in trouble.

Currently, SK Hynix is ​​the exclusive supplier of third-generation HBM (HBM3) to Nvidia, the world's largest graphics processor (GPU) company, and occupies more than 90% of the HBM3 market. Although Samsung Electronics entered the HBM3 market late, it failed to pass Nvidia's quality test. SK Hynix also successfully delivered the fifth-generation HBM (HBM3E) to Nvidia before Samsung, so Samsung Electronics must narrow the gap with SK Hynix in HBM market share.

In the foundry business, narrowing the gap with industry leader Taiwan's TSMC is crucial. Intel, which has publicly set a goal of surpassing Samsung Electronics by 2030, is another challenger that Samsung must fend off. According to market research firm TrendForce, TSMC's market share in the global foundry market reached 61.2% in the fourth quarter of last year, while Samsung Electronics' market share was 11.3%, and the gap widened to 49.9 percentage points. Samsung Electronics is the world's first company to develop ultra-fine process technology below 3 nanometers, and it wants the vice chairman to personally supervise the development and mass production process, which is a key step in its pursuit.

Vice Chairman Jeon has a unique mission to revitalize Samsung's semiconductor business. He is a professionally trained engineer and a key figure in the success of Samsung's memory. He worked at LG Semicon, the predecessor of SK Hynix, before joining Samsung Electronics in 2000. He has extensive experience in the development and marketing of DRAM and NAND flash memory and rose to the position of business leader of the memory division. Later, he served as president and chairman of the board of directors of Samsung SDI, leading the battery business, and returned to Samsung Electronics last year to head the future business planning group.