Samsung Faces Shareholder Scrutiny Amid AI Challenge
Seeking Growth in a Competitive Landscape
On Wednesday, Samsung Electronics announced its commitment to pursuing growth, even as shareholders expressed concerns about the company’s lackluster performance in the wake of an artificial intelligence boom. This predicament has led Samsung to become one of the worst-performing tech stocks over the past year.
Challenges in Earnings and Market Position
The South Korean tech giant has recently struggled with weak earnings and declining share prices. Falling behind competitors in advanced memory chips and contract chip manufacturing, sectors that are currently enjoying robust demand due to AI projects, has only exacerbated the situation.
Shareholder Voices: An Urgent Call for Action
“I have never been to a Samsung AGM since I became its shareholder in 2000, but I wanted to see what executives have to say (this time) and what they will do,” remarked a 65-year-old shareholder, identified only as Lee, prior to the meeting.
Lee suggested that the company should fully commit to the memory chip business, where it has historically excelled, or rethink its approach to foundry operations.
Headwinds in Semiconductor Industry
In internal conversations, Samsung has acknowledged that it has lost ground, especially in the semiconductor arena. The company is significantly trailing SK Hynix in the production of high bandwidth memory (HBM) chips, which are essential for AI graphic processing units relied upon by companies like Nvidia.
Chairman’s Assessment: A Call for Innovation
Samsung Chairman Jay Y. Lee conveyed a critical message during an internal executive seminar, stating, “Our technological edge has been compromised across all our businesses.” He emphasized the necessity for more substantial innovation, lamenting the focus on maintaining the status quo rather than embracing transformative challenges.
Projections for 2025: A Difficult Road Ahead
During the shareholders’ meeting, Samsung co-CEO Han Jong-hee warned that the year 2025 is likely to be challenging due to unpredictable economic policies in major global markets. He added that the company would aim for “meaningful” mergers and acquisitions while striving for tangible results.
Stock Performance and Market Share Concerns
Last year, shares of Samsung experienced a significant decline of nearly one-third, contrasting sharply with SK Hynix, whose stock climbed by 26%. Furthermore, Samsung has also seen a reduction in its market share against TSMC in contract chip manufacturing and against competitors such as Apple and Chinese smartphone makers.
Share Buyback Initiative: A Step Towards Recovery
In response to its stock plummeting to four-year lows, Samsung initiated a share buyback plan in November, worth 10 trillion won ($7.2 billion). Since then, the company’s shares have risen by an encouraging 7%.
Samsung’s Dominance in the South Korean Market
Despite the challenges, Samsung remains South Korea’s most valuable corporation, with a market capitalization of $235 billion. This figure accounts for an impressive 16% of the total value of the nation’s main stock exchange. According to market data, nearly 40% of investors in South Korean stocks hold Samsung shares.
Concluding Thoughts
As Samsung faces compounding pressures from shareholders, competitive market dynamics, and an evolving technological landscape, the forthcoming years will be crucial. The company’s ability to innovate and adapt will determine its trajectory in the tech world.
Questions and Answers
1. What challenges is Samsung facing currently?
Samsung is facing challenges such as weak earnings, declining share prices, and losing ground in the semiconductor market, particularly against competitors like SK Hynix.
2. How has the company responded to its falling stock prices?
In response to its plunging stock prices, Samsung launched a share buyback plan worth 10 trillion won ($7.2 billion) to help stabilize its stock value.
3. What did Samsung’s Chairman say about the company’s situation?
Chairman Jay Y. Lee acknowledged that Samsung’s technological edge has been compromised and emphasized the need for innovation rather than merely maintaining the status quo.
4. What does Samsung’s co-CEO predict for 2025?
Co-CEO Han Jong-hee predicted that 2025 would be difficult due to uncertainties surrounding economic policies in major economies, suggesting that the company would seek significant mergers and acquisitions.
5. How significant is Samsung’s position in the South Korean market?
Samsung is South Korea’s most valuable company, with a market capitalization of $235 billion, representing 16% of the total value of the national stock market, and nearly 40% of South Korean investors own Samsung shares.
