" The South Korean technology giant reported a preliminary operating profit of ₩9.1 trillion ($6.8 billion) for the third quarter, falling short of the market expectations of ₩10.3 trillion, according to LSEG SmartEstimates.

Despite the fact that its operating profit nearly tripled compared to the previous year due to a surge in memory chip prices, this figure represents a 13 percent decline from the second quarter. Investors have been rattled, as evidenced by the company's share price dropping nearly 30 percent over the past six months amidst growing concerns over Samsung's competitiveness in the realm of advanced chips crucial for AI systems.

In a letter addressing customers, investors, and employees, Young Hyun Jun, the head of Samsung's chip division, expressed regret: "The leadership team at Samsung Electronics wishes to apologize for not meeting your expectations with our performance," he stated. Jun acknowledged the anxiety regarding the company’s technical competitiveness and took full responsibility for the perceived crisis.

The underwhelming profit guidance heightens investor trepidation concerning the deteriorating memory market conditions and potential slowdown in AI investment by major tech firms. Although recent upbeat forecasts from Micron Technology offered some reassurance, the landscape remains challenging. "Concerns are growing as legacy memory demand is slowing and smartphone demand is weaker than expected," explained analyst Kim Hyun-tae of Shinhan Securities.

Additionally, a recent report by Morgan Stanley has exacerbated industry fears, foreseeing a memory downturn driven by decreased demand for conventional DRAM memory and a possible oversupply in high-bandwidth memory (HBM). Analysts Shawn Kim and Duan Liu warned of tougher times ahead for revenue growth and margins.

Amidst these challenges, Samsung's stock reached its lowest level in 18 months last week. The company is lagging behind competitors SK Hynix and Micron in supplying the most advanced HBM chips, essential for AI systems. SK Hynix, Nvidia's primary HBM chip supplier, recently began mass-producing its cutting-edge 12-layer HBM3E chips, thus widening its technological advantage over Samsung.

Samsung’s efforts to narrow the gap with Taiwan Semiconductor Manufacturing Co (TSMC) in contract chipmaking are also faltering. Analysts from Macquarie have raised concerns that Samsung’s $17 billion foundry in Taylor, Texas, might become a "big stranded asset" due to a lack of major clients. This facility is slated to start producing advanced chips by 2026.

In the high-end smartphone market, Samsung faces fierce competition from Huawei, which recently launched a $2,800 tri-fold phone, and Apple, which introduced the iPhone 16 with new generative AI features.

Samsung is undertaking workforce reductions among its 147,000 overseas staff and addressing growing discontent among domestic employees. "Our primary focus will be on enhancing our fundamental technological competitiveness," Jun emphasized, adding that the company will review its organizational culture and processes to make necessary improvements.