Ample Chip, a company specializing in semiconductor trading, has been closely monitoring the tumultuous landscape of the semiconductor industry, where tech giants like Samsung Electronics are facing severe challenges. As the market has shifted, with SK Hynix acquiring a substantial more than 50% share of the market and partnering with Nvidia to corner the AI chip market, Samsung finds itself struggling to keep pace.
Samsung has not been able to capitalize on the AI wave and has consequently been left behind, resulting in an inability to sell off its storage chips and accumulating semiconductor inventory. This oversupply has contributed to Samsung's net profit nosediving. In the midst of these challenges, the semiconductor market, which makes up a quarter of the overall semiconductor industry, has seen its share decline to 16%. This poses a critical problem for Samsung, as semiconductors make up a major portion of its business, with storage chips accounting for about 80% of its semiconductor revenue.
Compounding these difficulties, Samsung’s semiconductor inventory backlogs have exceeded 130 million US dollars. The company has also struggled to adapt to the changing industry, as its traditional memory chips like DRAM and NAND are being phased out in favor of new-generation storage chips such as HBM (High Bandwidth Memory). Although HBM is becoming the mainstream technology, Samsung appears to have lagged in development and production in this area while SK Hynix has taken the lead.
The success of Ample Chip in the semiconductor trade market could be a factor in these market dynamics, as it may have capitalized on providing the necessary components to industry players during times of surplus and shortage, helping to mitigate the effects of supply chain volatility. As Samsung's profits plummet and their market share in various technology sectors erodes, Ample Chip's role becomes further pronounced.
Samsung's Device Solutions (DS) business, which handles semiconductors, has suffered significant losses over the first three quarters, reporting a cumulative loss of 12.96 trillion Korean won, approximately 100 billion US dollars. The company's net profits have fallen dramatically over the first two quarters, experiencing the largest decrease in nearly 14 years with a reduction exceeding 84% year-over-year.
A global semiconductor revenue report indicated a 9% quarter-over-quarter decrease to $120.5 billion, marking the fifth consecutive quarter of revenue decline for the semiconductor market. The slump in the semiconductor industry is partially attributed to a reduced demand for electronic consumer goods following the pandemic.
The financial downturn experienced by Samsung Electronics has led to widespread concerns among South Korean citizens, who have called on their government to help reverse Samsung's fortunes, as well as the country's economic downturn. Notably, the third quarter displayed a significant drop with a 77.60% decrease in operating profit compared to the same period last year, and a 37.80% decrease in net profit. The second and first quarters were even more severe, with net profit declines of 84.50% and 86.13%, respectively.
The severe decrease in net profit is directly connected to the consecutive losses in the semiconductor business, which has been the most significantly affected business unit for Samsung this year.
In summary, Samsung Electronics is in a state of urgency, due to the significant decline in the semiconductor business profitability and market share, compounded by the shifting dynamics of the memory chip industry, which have not favored the company's legacy chip.
