Samsung Electronics is facing a serious crisis. Despite holding the top market share in DRAM, it is under intense pressure from SK Hynix. 

January 28, 2025 - In the contract semiconductor manufacturing (foundry) business, Samsung’s technology gap with Taiwan Semiconductor Manufacturing Co. (TSMC) continues to widen. Having missed the surge in AI semiconductors, Samsung is falling behind, necessitating urgent reforms.

Unprecedented Internal Struggles: First Strike in History

“Samsung has a military-like corporate culture. I never imagined a strike would occur,” said an industry insider, expressing surprise at the first-ever labor strike in the semiconductor division since Samsung’s founding in 2024 over wage disputes and other issues. This development suggests fundamental organizational problems within a company that has historically thrived under strong leadership.

Improved Financials but Below Expectations

In the preliminary consolidated financial results for FY2024, Samsung reported a 16% year-on-year increase in revenue to 300.8 trillion won (approximately 32.5 trillion yen), with operating profit surging fivefold to 32.73 trillion won. However, these figures fell short of analysts' expectations. While the semiconductor division showed improvement due to market recovery, it was not enough to reassert Samsung’s dominance.

Missed AI Boom and Foundry Struggles

One of Samsung’s biggest setbacks has been its delayed development of high-bandwidth memory (HBM), a crucial component for AI applications. SK Hynix has secured Nvidia as a major customer, leaving Samsung struggling to penetrate this high-demand market. “HBM is a custom product that resembles logic semiconductors in terms of pricing stability, making it a highly profitable sector,” noted an industry expert.

At the same time, Samsung’s foundry business is facing difficulties. While the company aimed to establish it as a core pillar alongside memory, TSMC retains a dominant 60% market share, and Samsung has failed to secure major clients such as Apple and Nvidia. Despite leading the industry in mass production of the next-generation gate-all-around (GAA) transistor structure at the 3-nanometer node, Samsung has been “struggling to improve yields,” leading to high manufacturing costs and an inability to attract key customers.

Investment Concerns and Future Opportunities

These struggles are likely to impact capital investment. A semiconductor equipment executive revealed, “Samsung’s investment plans are facing delays and possible revisions.” Some South Korean media outlets have reported that foundry investment may be reduced in 2025, which could also affect Japanese semiconductor equipment suppliers.

However, as global investment in AI servers rises, the demand for HBM will inevitably grow. “SK Hynix and Micron alone cannot meet the demand. Samsung’s supply will be needed,” said another industry source. Additionally, some fabless companies are seeking alternative foundries to reduce dependence on TSMC. For Samsung to stage a comeback, it must first catch up in technology and leverage its enormous production capacity effectively.

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Source: Nikkan Kogyo Shimbun