Samsung posts weaker Q3 profits amid AI chip delays

South Korean tech giant also faces mounting pressure from its rivals

Samsung Electronics has issued a rare apology as it warned that its third-quarter profits would fall short of market expectations

The South Korean tech giant cited delays in its AI chip business and intensified competition in the semiconductor market.

Samsung, which has dominated the memory chip industry for over 30 years, faces mounting pressure from rivals, particularly in the growing field of advanced chips used in artificial intelligence (AI) applications.

As reported by Reuters, the company announced an estimated operating profit of 9.1 trillion won ($6.78 billion) for the third quarter, a figure that falls below the 10.3 trillion won projected by analysts. This represents a recovery from last year's 2.43 trillion won profit during the same period but marks a significant drop from the 10.44 trillion won posted in the previous quarter.

Samsung attributed the earnings shortfall to delays in the release of its high-end AI chips, HBM3E, for a major customer, along with increased competition from Chinese chipmakers who are expanding their share of the conventional semiconductor market. The company also highlighted the impact of weaker demand for smartphones and PCs, products which rely on lower-margin chips.

"We have raised concerns about our competitive edge in technology, with some even discussing a potential crisis for Samsung," said Young Hyun Jun, Vice Chairman of Samsung's Device Solutions Division. "These are challenging times, but we are determined to turn this into an opportunity and focus on boosting our long-term technological capabilities."

Samsung’s struggle to keep pace in the AI chip market has left it trailing behind key competitors such as SK Hynix, which has made significant headway in supplying high-bandwidth memory chips to Nvidia, a leader in AI technology. This has intensified pressure on Samsung, which remains highly dependent on its traditional chip business, leaving it vulnerable to competition and fluctuations in global demand.

Despite a challenging quarter for its semiconductor business, Samsung saw improved performance in its mobile division, driven by strong sales of flagship smartphones. The company’s display unit also posted gains, supported by the launch of new products from key customers, including Apple.

Samsung is preparing to release its full earnings report on 31 October.