How Samsung's AI Ambitions Have Driven Chip Focus

As tech companies worldwide scramble to position themselves in this digital era, Q3 results are reflecting who is at the front of the race.

In this time of digitalisation, the global semiconductor industry is changing, with AI-driven demand reshaping market dynamics and competitive landscapes.

Merging into the forefront of the race, South Korean electronics giant, Samsung Electronics, has set its sights on capitalising on the AI boom to boost its profitability and maintain its competitive edge.

The company's recent financial results and strategic outlook reflect the opportunities and the challenges presented by this technological shift, as well as the broader economic uncertainties facing the tech sector.

As traditional chip markets face headwinds, companies are pivoting towards high-performance computing and AI-specific solutions to drive growth.

This shift is occurring against a backdrop of geopolitical tensions and supply chain disruptions, adding complexity to strategic decision-making for industry leaders like Samsung.

We highlight Samsung’s achievements, why it is focusing on AI and what it is doing to tackle challenges within the tech industry.

Samsung earnings reflect challenges in competitive landscape

Samsung Electronics is the world's largest manufacturer of memory chips, smartphones and televisions and having reported its financial results for the third quarter of 2024, it’s revealed a mixed performance across its various business divisions.

The company posted consolidated revenue of 79.1tn Korean won (US$58bn), marking a 7% increase from the previous quarter.

However, Samsung's operating profit declined to 9.18 tn won (US$6.7bn), largely due to one-off costs and increased competition in the semiconductor market.

The company's chip division, in particular, saw its operating profit fall to 3.9tn won from 6.5tn won in the previous quarter.

The decline in chip profits stands in stark contrast to the performance of Samsung's rivals, such as Taiwan Semiconductor Manufacturing Company (TSMC) and SK Hynix, both of which reported record earnings driven by strong demand for AI-related semiconductors.

This disparity highlights the challenges Samsung faces in capitalising on the AI boom, particularly in the high-end chip market.

Samsung’s strategic shift towards AI and premium products

In response to these challenges, Samsung has announced a strategic shift towards focusing on high-end chips and AI-related technologies to improve its profitability.

The company plans to concentrate on driving sales of High Bandwidth Memory (HBM) and high-density products, which are crucial components for AI applications.

According to Samsung's earnings statement: "In the fourth quarter, while memory demand for mobile and PC may encounter softness, growth in AI will keep demand at robust levels".

This outlook reflects the company's recognition of AI as a key driver of future growth in the semiconductor industry.

Additionally, Samsung's Device Solutions (DS) Division, which encompasses its semiconductor business, aims to address demand for differentiated products based on advanced technologies and high value-added products such as HBM and server SSDs.

The company also plans to leverage its upcoming mass production capabilities for 2-nanometre Gate-All-Around (GAA) process technology to win new clients.

Samsung’s ambitious goals for 2025 and beyond

Looking to 2025, Samsung has outlined ambitious goals to enhance its competitiveness in advanced technologies and strengthen its leadership in premium products and AI capabilities.

The company plans to tailor its AI technology across its diverse product range, which includes over 500 million devices delivered to consumers globally each year.

The company intends to leverage its SmartThings platform, which boasts 360 million users, to establish itself as a leader in the future AI-driven home market.

Its focus areas include product security, device connectivity, intelligent energy-saving technology and solutions for users' health and well-being.

Meanwhile, in the mobile sector, Samsung's MX Business aims to drive sales growth and improve profitability with a focus on flagship products, including smartphones, foldables, tablets and wearables, based on further advancements in its Galaxy AI technology.

Samsung’s expanding presence in emerging technologies

Beyond its core semiconductor and consumer electronics businesses, Samsung is also making significant strides in emerging technologies that complement its AI focus.

The company's System LSI Business is capitalising on the growing momentum of on-device AI, concentrating on supplying system-on-chips (SoCs) for flagship products of major customers while preparing for next-generation 2nm products.

In the display technology sector, Samsung Display Corporation (SDC) is working to maintain its leadership in the high-end product category, particularly in foldable and premium smartphone markets.

The company is developing innovative OLED technologies optimised for AI devices and accelerating the expansion of IT and automotive products to diversify its business portfolio.

Samsung's Foundry Business is also positioning itself to capitalise on the expected double-digit growth in the overall foundry market, driven by high-performance computing and AI applications in advanced technology nodes.

Overall, the business aims to expand revenue through ongoing yield improvements in advanced technology while securing major customers through successful 2nm mass production.

Samsung’s Electronics Vice Chairman Head of Device Solutions Division, Jun Young-hyun, summarises: “Above all, we will restore our fundamental technological competitiveness. Technology and quality are our lifeblood.

“It is Samsung Electronics’ pride that we can never compromise on. Rather than short-term solutions, we will secure fundamental competitiveness.”

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