Samsung’s failures in the areas of memory for AI and contract manufacturing of chips cost it $122 billion in capitalization

Samsung Electronics’ status as the world’s largest memory maker doesn’t help it compete with smaller company SK hynix, which has captured much of the market for HBM memory used in computing accelerators for AI systems. Since the beginning of July, Samsung has lost $122 billion in capitalization, largely due to the lack of success in this market segment.

Image Source: Samsung Electronics

Bloomberg recalls this, citing the Samsung Electronics stock price reaching its local maximum on July 9 of this year, which was followed by a continuous decline. In total, Samsung’s capitalization during this time decreased by 32% or $122 billion – more than that of all other chip suppliers. The situation with the lag behind SK hynix in the HBM market was aggravated by the lack of success in the confrontation with TSMC in the market for contract manufacturing services for chips. Foreign investors have sold Samsung shares for a total of about $10.7 billion since July. Even now, at attractively low prices, Samsung shares are able to attract few investors.

Smartphones and other types of consumer electronics still make up the bulk of Samsung Electronics’ revenue, but the company’s profit structure in recent years has shown a growing share of semiconductor components, which have come to dominate in this regard. If the company is plagued by failures in the semiconductor sector, investor confidence will be negatively affected. The priorities of stock market participants are eloquently illustrated by the dynamics of changes in the capitalization of Nvidia, which is considered the leader of the AI ​​boom. Its capitalization has increased by more than $330 billion since the beginning of this year.

In August, investors still hoped that Samsung would be able to get into the HBM supply chain for Nvidia’s needs, but in early October the Korean giant had to admit that there were delays in the start of deliveries of the latest HBM3E. Attempts to survive the competitive race with TSMC in the contract chip manufacturing market also take a lot of resources from Samsung, but do not provide adequate returns. It came to staff reductions outside of South Korea, and inside the country, employees decided to go on a long-term strike for the first time in the company’s history. Samsung Electronics is due to release its quarterly report later this week, and some investors are expecting announcements about changes in the Korean giant’s management. But even such measures do not guarantee any quick recovery from the crisis, the conditions for which have been taking years to form.