Only a few months in the past, Samsung Electronics seemed primed to profit from the worldwide AI growth: income have been surging and its inventory was rising in direction of an all-time excessive.
Now South Korea’s greatest firm has turn into a stark instance of how rapidly fortunes can flip in an business the place the spoils go to those that preserve a technological edge.
As considerations mount that the corporate is dropping out to smaller rival SK Hynix in AI reminiscence and failing to achieve on Taiwan’s TSMC in outsourced chip-making, Samsung shares have tumbled 32% from this yr’s peak on 9 July. The corporate has misplaced $122-billion of market worth in that span, greater than some other chip maker worldwide.
Samsung has promised an overhaul to regain competitiveness, however worldwide cash managers together with Pictet Asset Administration and Janus Henderson Buyers are unconvinced a turnaround is imminent. Abroad buyers have offered about $10.7-billion price of the South Korean firm’s shares on a internet foundation because the finish of July.
“We now have greater than halved our place in Samsung over the previous couple of months — it was the biggest place in our technique in July,” stated Sat Duhra, a portfolio supervisor at Janus Henderson Buyers in Singapore. Whereas Duhra stated the shares have fallen to a sexy valuation, he has “no intention” to purchase them for now.
Smartphones and different client electronics nonetheless account for the largest share of Samsung’s gross sales, however semiconductors have been contributing probably the most revenue lately. With the latest disaster in its chip enterprise, the Suwon-based firm issued a uncommon apology to buyers earlier this month for disappointing outcomes.
Exodus
The corporate’s story highlights how AI is the important thing issue minting winners and losers in at the moment’s chip sector. Whereas overseas buyers have led an exodus from Samsung, Nvidia has turn into one of many world’s largest firms. TSMC, the important thing maker of chips designed by Nvidia and Apple, has added over $330-billion in market worth this yr.
Issues went south for Samsung rapidly. Its inventory flirted with a report excessive after it posted a 15-fold surge in working revenue for the June quarter. As lately as August, buyers have been optimistic it might win extra enterprise supplying Nvidia with high-bandwidth reminiscence to work alongside AI processors.
Learn: TSMC nears $1-trillion valuation as brokers increase targets
That hope has been snuffed out with the corporate admitting delays with its latest-generation HBM chips in early October, quickly after SK Hynix stated it had begun quantity manufacturing. In the meantime, US rival Micron Know-how is stepping up efforts in HBM as properly, and has reported robust demand for its choices.
Samsung is “dropping its expertise management within the semiconductor enterprise”, stated Younger Jae Lee, London-based senior funding supervisor of the worldwide rising markets high-dividend group at Pictet Asset Administration. “Know-how management is tough to regain within the quick time period by nature,” he stated, including that the agency has been lowering its Samsung holding.
Past its lag in AI reminiscence, Samsung has struggled with a pricey, yearslong effort to shut the hole with TSMC in foundry enterprise. Like Intel — which has run into related problem with plans to broaden its outsourced chip-making operations — the Korean agency is now shifting to chop jobs and make different efforts to cease the bleeding.
Samsung is holding a convention name on Thursday after it releases detailed third-quarter earnings. Amongst factors to look at is an anticipated administration reshuffle earlier than the top of the yr, amid ongoing uncertainty over firm management.
Jay Y Lee — a grandson of Samsung’s founder who was appointed govt chairman two years in the past — was acquitted of inventory manipulation fees in February after years of authorized points. Three months later, the corporate unexpectedly changed its semiconductor division head with Jun Younger-hyun, a reminiscence chip veteran.
Learn: Samsung, Apple lead progress in smartphone shipments
Administration might have its work reduce out for it in making an attempt to win again buyers, even with inventory valuations close to a report low and technical indicators flashing oversold alerts.
“We don’t see a lot is altering with the Samsung executives and engineers are leaving the corporate,” stated Park Jinho, head of fairness funding at NH-Amundi Asset Administration in Seoul. Park decreased Samsung to underweight from impartial on the finish of the second quarter and added SK Hynix as a substitute. — Youkyung Lee and Yoolim Lee, with Karen Yang, Selcuk Gokoluk and Heejin Kim, © 2024 Bloomberg LP
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