After disappointing outlook, Samsung makes an impressive mea culpa in a letter

(BFM Bourse) – Samsung Electronics delivered outlooks significantly below expectations for the third quarter. In a letter addressed to its shareholders and employees, the Korean group apologizes for this disappointing publication and acknowledges going through a difficult period.

Samsung Electronics makes an act of contrition. The Korean technology conglomerate, the largest subsidiary of the Samsung group, disappointed investors and analysts on Tuesday with a lower-than-expected outlook for its third quarter. This led the country’s largest stock market company to present an apology, both unexpected and heavy, in a letter.

Samsung said on Tuesday it was targeting around 79,000 billion won in revenue (or around 53 billion euros) and 9,100 billion won in operating profit for the third quarter. According to an LSEG consensus cited by Reuters, analysts expected 10.3 trillion won in operating profit for the period.

These announcements constitute “a shock compared to the initial forecasts of many analysts” declared Lee Min-hee, analyst at BNK Investment & Securities, quoted by Reuters.

On the Seoul Stock Exchange, Samsung Electronics shares lost 1.15%.

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“A lot of people are talking about the Samsung crisis”

The market reaction was therefore hardly violent. But the stock has lost more than 30% over the last three months. Enough to push the company to still make its mea culpa in a letter addressed to its shareholders, its employees and its customers.

“Today, we, the management of Samsung Electronics, would like to first apologize to you,” the group said in this letter signed by Jun Young-hyun, the company’s vice president in charge of the division. device solutions, which includes memory chips and semiconductor foundry business.

“The performance, which did not meet market expectations, raised concerns about the fundamental technological competitiveness and the future of the company,” the company continued in a letter translated by several American sites (The Verge, CNBC).

“A lot of people are talking about Samsung’s crisis. All of this responsibility falls on us, who run the company,” the group continues.

Asking for “support from its stakeholders”, Samsung Electronics promises to transform this crisis “into an opportunity” and restore its “technological competitiveness”.

“Technology and quality are our driving forces. This is the pride of Samsung Electronics, on which we can never compromise. Rather than short-term solutions, we will ensure fundamental competitiveness,” assures the company.

A colossus with feet of clay?

Wishing to “rearm” itself, Samsung Electronics will examine its “working methods” and its “organizational culture” by “repairing what needs to be repaired”. “If we see a problem on the ground, we report it and engage in a lively discussion to improve it. In particular, we will actively communicate with investors whenever we have the opportunity,” says the company.

These excuses come as the company sees its leading position in memory chips, integrated circuits that allow data to be stored, challenged.

Bloomberg thus underlines that Samsung is left behind by its South Korean competitor SK Hynix in the production of high-bandwidth memory chips, notably used for the development of generative artificial intelligence by Nvidia. Or even by the American group Micron. Samsung also announced on Tuesday, in a document sent to the Korean stock exchange authorities, that the start of deliveries of a new range of this type of chips to a major customer had been delayed.

“Samsung’s delayed response to the AI ​​chip market is increasing its reliance on low-margin traditional chips, making it more vulnerable to competition from China and slowing demand, analysts say of smartphones and computers”, underlines Reuters.

In addition, Samsung is unable to catch up in its chip foundry activity compared to the giant of the sector, the Taiwanese TSMC, points out Bloomberg.

Markets are demanding that Samsung prove itself, Sanjeev Rana, an analyst at CLSA Securities Korea, told the agency, referring to comments in the letter. Samsung stock “will rise when there are tangible signs of improvement,” he added.

Julien Marion – ©2024 BFM Bourse