Here's why Samsung is apologizing amid what they're calling a "crisis" situation

Samsung is in a bit of a pickle. You’d think that raking in $6.78 billion in profit last quarter would be a cause for celebration, right? Wrong. For Samsung, it’s an apology-worthy disaster. But how did we get here? Let’s try and break it down.

A billion-dollar “Sorry, we missed the mark”

In a rare and rather dramatic move, Samsung publicly apologized for falling about $900 million short of analyst expectations. Yep, you read that right: they’re apologizing for racking in just $6.78 billion in operating profit. Vice Chairman Jun Young-hyun went as far as to say that this has raised “concerns about our fundamental technological competitiveness and the future of the company.”

Let’s be clear: Samsung is still making billions, but it’s not hitting those sky-high targets. And when you’re a global tech leader, even a slight stumble in performance is enough to get the investors antsy. So what went wrong? Well, a mix of fierce competition, chip delays, and the AI hype train cruising faster than they could keep up with.

AI dreams and delays

One of Samsung’s big bets to reverse their fortunes was on AI. The company’s high-bandwidth memory chips, particularly the new HBM3E ones, were supposed to be a hit. The kind of chips that power AI models like the ones Nvidia needs for their booming business. In fact, last quarter, Samsung saw a 15x increase in profits thanks to selling these AI-powered memory chips.

But then the sale of these high-end chips to one major, mysterious customer got delayed. Competitors like SK Hynix, meanwhile, swooped in to fill the gap. With AI demands spiking and Samsung’s chips held up, the company couldn’t ride the AI wave as smoothly as planned.

The Foxconn and TSMC factor

Samsung’s struggle isn’t just about AI chips. The company has also been grappling with chip manufacturing challenges across the board. Enter their rival TSMC — Samsung’s Taiwan-based nemesis, who’s been gobbling up contracts from big names like Apple and Nvidia. TSMC has a commanding lead in the chipmaking race, and Samsung’s been left chasing the dust.

TSMC is miles ahead in the foundry business, holding more than 50% market share, while Samsung Foundry has been playing catch-up. With difficulties mounting at Samsung’s new chip factory in Texas and delays pushing production back until 2026, it’s safe to say that things haven’t been going as planned. Even Samsung’s internal plans to overtake TSMC by 2030 are looking shaky at this point.

So, is Samsung in trouble? In short: sort of, but not really. While their apology makes it sound like they’re on the brink of disaster, it’s more like they’re facing a tech version of a midlife crisis. They’ve hit a rough patch — one where they’ve missed some big sales targets, lost ground to competitors, and haven’t wowed the market as much as everyone expected.

But let’s not forget: this is Samsung we’re talking about. They’re no stranger to rough patches, and they’ve always managed to bounce back. In their apology letter, they laid out a plan to “restore fundamental competitiveness” through new technologies and perfect quality. And if you’ve ever owned a Samsung product, you know they have a knack for churning out high-quality tech when they set their minds to it.

While things look bleak in the short term, Samsung is betting big on AI and chip manufacturing to turn the tide. Their chairman, Jay Y. Lee, has made it clear that they’re not giving up — Samsung’s long-term strategy remains intact. And Foxconn’s move to build the world’s largest AI chip factory for Nvidia shows that the AI gold rush is far from over.

It’s going to take some time (and possibly more apologies) before Samsung fully recovers from its current woes. But they’re for sure not going down without a fight. So, while they might be apologizing today, don’t be surprised if they come roaring back tomorrow.