Samsung seeks to reassure markets over semiconductor competitiveness

Samsung Electronics reassured markets about the competitiveness of its semiconductor business after a series of warnings from investors, analysts and employees that the Korean company was losing its technological edge.

The South Korean conglomerate is the world market leader in memory chips, and breathes the ambition of closing the gap About Taiwan Semiconductor Manufacturing Company’s main rival in the foundry sector, where companies contract to manufacture chips designed by others.

Illustrating the company’s importance to the global economy, US President Joe Biden visited its Pyeongtaek semiconductor plant during a visit to South Korea in May.

But earlier this year the company lost its two biggest foundry customers, Qualcomm and Nvidia, to TSMC, according to analysts, who suggested the companies were frustrated by Samsung’s inability to deliver steady volumes of the 4nm and 5nm chips that make up computer central processing units .

TSMC captured 54% of the foundry market in the first quarter of 2022, more than three times Samsung’s market share, according to market researcher TrendForce.

Last year, Samsung announced a Won171tn ($151 billion) investment plan for foundry chips by 2030. But its Taiwanese rival plans to invest up to $44 billion this year compared to Samsung’s estimated $12 billion, according to Seoul-based SK Securities.

And in the D-Ram business, traditionally Samsung’s forte, rivals Micron Technology and SK Hynix have been quick to unveil some of the most advanced chips. D-Ram technology enables short-term storage for graphics, mobile and server memory chips.

Problems with its flagship Galaxy S22 smartphone, launched in February, suggest that the South Korean group also falls behind Apple on hardware competitiveness, while the performance and sales of Samsung’s Exynos 2200 mobile processor chips, launched this year, were disappointing.

Investors including hedge funds Petra Capital Management and Dalton Investments have raised concerns about what they describe as Samsung’s rigid corporate culture under the leadership of Lee Jae-yong, Samsung’s vice chairman and acting chief executive.

They claim that the company preferred rapid development and cost savings over quality and innovation.

“Designing their chips requires creativity and engineering ability, but Samsung’s risk-averse culture has deepened under Lee Jae-yong’s leadership, with engineers shying away from new innovation attempts,” said Chan Lee, managing partner at Seoul-based Petra Capital Management.

Investors have raised concerns about what they say is a rigid corporate culture under Lee Jae-yong, Samsung’s vice chairman and acting leader © Jeon Heon-Kyun/Pool via AP

In April, a junior engineer who worked in Samsung’s semiconductor technology development team wrote a letter to the company’s leadership complaining that Samsung researchers were under enormous time pressure to meet “impossible” targets for developing new technology and products, and that a “sense of failure” had permeated the organization.

“It seems that the top decision-maker is unable to grasp the root of the problems,” added the engineer. “I’ve heard quite a few stories about a ‘crisis’ but I think this moment is more dangerous than ever.”

“Design and pub cultures are critical to success. These genius engineers need the right motivation, direction and leadership,” Dylan Patel, principal analyst at SemiAnalysis, wrote recently Report. He attributed Samsung’s problems to a “toxic” culture in which different business units blame each other “in the face of mistakes” for its weakness in the non-memory sector.

Samsung’s share of the smartphone app processor market has nearly halved since 2019 and last year ranked fourth with 6.6 percent, compared to Qualcomm’s 37.7 percent, MediaTek’s 26.3 percent and Apple’s 26 percent, according to market research firm Strategy Analytics.

“[Samsung’s] The technological advantages are all falling apart,” Patel wrote. “Samsung is slipping in all aspects of technological development, including the one area where they crushed all the competition, D-Ram.”

Samsung Electronics reported a Operating profit is smaller than expected to the second quarter of 2022, when inflation reduced consumer demand for electronic devices.

It is also bracing for waning demand in response to global price increases following the pandemic-driven surge in the tech sector over the past two years.

But company executives say its memory business still enjoys a technological edge over its competitors, citing the faster adoption of extreme ultraviolet lithography technology for making memory chips and its dominant D-Ram market share of about 40 percent.

Kang Moon-soo, vice president of Samsung’s foundry business, described the market’s concern about losing key customers as “overblown,” telling analysts in April that it had a backlog of orders for the next five years, or eight times last year’s revenue. from the business

Analysts said TSMC’s faster move to mass production of 4nm and 5nm chips has affected the Korean company’s ability to produce state-of-the-art chips in sufficient volumes for its most prominent customers.

But Samsung told the Financial Times it was now able to produce stable quantities of the chips and would “maximize” supply. An executive told analysts on Thursday that the company is “reorganizing” its chip design business to strengthen its long-term competitiveness.

Earlier this week, the company held a ceremony to celebrate its first shipment of 3nm chips, after beating out TSMC to bring the next generation of memoryless chips to market.

“Samsung still has a chance to attract customers again if it can increase the rate of return on advanced chips,” said James Lim, an analyst at California-based hedge fund Dalton Investments. “No one wants to take on the risk of being totally dependent on TSMC.”

Samsung also said it is making efforts to create an “inclusive challenge culture” through “open communication” with employees. She said she continued to talk to employees about the company’s vision and business direction.

There is optimism in the company that Lee, a scion of the company’s founding family, will receive a pardon from President Yoon Suk-yeol next month.

Lee was released from prison on parole last year, after serving 60 percent of his sentence for bribing former President Park Geun-hye to secure his family’s control of Samsung Electronics.

But he remains under restrictions regarding his employment and business activities, making it difficult for him to effectively oversee the management of the sprawling Samsung conglomerate. Presidential pardons are traditionally granted ahead of South Korea’s Independence Day in mid-August.

Samsung seeks to reassure markets over semiconductor competitiveness Source link Samsung seeks to reassure markets over semiconductor competitiveness

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