From the looks of the current market, Samsung is facing a triple whammy - a slow response to the artificial intelligence chip market, Chinese rivals and fierce foundry competition with TSMC.

Samsung Electronics Vice Chairman and head of semiconductor business Jeon Yong-hyun said on Tuesday that he would take significant steps to improve the company's profitability and regain the lead in memory after lower-than-expected third-quarter earnings.

Personnel adjustments and restructuring in Samsung's chip division could take place in a year-end executive reorganization to instill a sense of crisis among employees, analysts said.

In a written message to, investors and customers, he said, “I regret that the failure to meet the expectations of the market employees has led to panic about our technology and against the future of the company.” Jeon Yong-hyun, head of Samsung's Device Solutions (DS) division, said, “The management team leading the business bears full responsibility, and we will lead the charge to overcome the crisis and make the weak third-quarter results a turning point for the company.”

His apology was in response to Samsung's first separate statement on the earnings report.

Mr. Jeon, who took office in May, outlined three key strategies for overcoming the crisis: restoring basic technological competitiveness, better preparing for the future and innovating organizational culture and work processes.

“Technology and quality are our lifeblood and the pride of Samsung Electronics. We cannot compromise on technology and quality,” he said. “We will focus on ensuring basic competitiveness rather than short-term fixes.”

Earlier in the day, the South Korean tech giant announced a four-fold increase in third-quarter profit, but its earnings fell well short of market expectations, prompting its chip chief to issue a rare apology for the poor performance.

The world's largest memory chip maker said in a regulatory filing that its consolidated operating profit for the July-September period was estimated at 9.1 trillion won ($6.8 billion), up 274.5 percent from 2.43 trillion won in the same period last year.

The preliminary operating profit was lower than the 10.8 trillion won that had been widely expected.

Samsung said third-quarter sales were likely to rise 17.2 percent from a year earlier to 79 trillion won, below the market's general estimate of 80.78 trillion won.

Samsung is scheduled to announce detailed quarterly results on Oct. 31, including net profit and divisional results.

In the second quarter, the company reported an operating profit of 10.44 trillion won on sales of 74.1 trillion won.

Samsung shares, which have fallen more than 20 percent this year, closed down 12 percent at 60,300 won on Tuesday, underperforming the benchmark Kospi index's 0.6 percent decline.

The global semiconductor market has recovered from last year's slump, driven by artificial intelligence devices and server chips, but the recovery in demand for traditional chips used in smartphones and personal computers is slowing.

Samsung has been struggling to keep up with smaller crosstown rival SK Hynix Inc. in the race to supply high-end AI chips such as high-bandwidth memory (HBM) to the world's top AI chip designer, Nvidia Corp.

While SK Hynix says more than half of its sales revenue comes from HBM and other high-value server DRAMs, Samsung has a relatively high share of smartphone and PC DRAM.

On Tuesday, Samsung said its plans to sell high-end HBM3E chips to major customers have been delayed. The company did not elaborate on the issue.

Samsung is working to supply its latest HBM chips to Nvidia.

Analysts say Chinese chipmakers have recently increased the supply of “legacy” chips, which has led to a drop in legacy chip prices and hurt Samsung's semiconductor earnings.

Industry officials said one-time charges of about 1.5 trillion won related to employee performance bonuses also hurt Samsung's third-quarter earnings.

Although Samsung did not provide a breakdown of the division's performance, the DS division, which is responsible for the chip business, may have posted an operating profit of 4 trillion won in the third quarter, much lower than in the previous quarter and the same period last year.

Its foundry, or contract chipmaking business could continue to lose 1.5 trillion won in the third quarter as it struggles to compete with leader Taiwan Semiconductor Manufacturing Co. (TSMC), whose customers include Apple and Nvidia.

Samsung's system LSI unit, which makes logic and system chips, also may lose 1.5 trillion won.

Samsung's main memory business could realize an operating profit of 5.5 trillion won, analysts said. If those figures are confirmed later this month, Samsung will for the first time report lower memory profits than SK Hynix.

SK, which makes only memory chips, DRAM and NAND, is widely expected to post an operating profit of 6.77 trillion won for the July-September quarter.

Samsung's Device Experience (DX) division, which makes and sells smartphones, displays and home appliances, is likely to post an operating profit of 2.6 trillion won, boosted by the new Galaxy series of smartphones and the Galaxy Ring.

SK Hynix's third-quarter operating profit is expected to outperform Samsung Electronics' semiconductor (DS) division by about 1.5 trillion won. Despite the recent slowdown in the general-purpose memory cycle, SK Hynix appears to be improving its performance by dominating the high-margin high-bandwidth memory (HBM) market for artificial intelligence semiconductors. Some say that Samsung Electronics' position as the No. 1 memory maker is faltering.

SK Hynix's third-quarter operating profit is expected to be 6,755.9 billion won, up 23.5 percent from the second quarter and turning into a surplus from last year, according to the securities firm's 8-day earnings forecast (consensus). SK Hynix's third-quarter sales are expected to come in at 1,799.78 billion won, up 9.5 percent from the previous two quarters and up 98.5 percent from a year ago.

On the same day, Samsung Electronics released a disappointing report card, recording a total operating profit of 9.1 trillion won in its preliminary third-quarter results, below the market's expectation of 10.7 trillion won. Samsung Electronics did not release results by business, but stock market analysis said the DS (Device Solution) division, which handles semiconductors, posted an operating profit of 5.3 trillion won, down from the second quarter of last year (6.46 trillion won). .

When the company announced on the same day that its results were below market expectations, Samsung Electronics management issued an unusual apology and lowered its head to say, “We will overcome the crisis by restoring the fundamental competitiveness of our technology.”

Samsung Electronics' low semiconductor performance was due to a slowdown in the general-purpose memory cycle as a result of inventory adjustments in smartphones and personal computers. The impact of the deficits in the system LSI and foundry businesses was particularly significant.

On the other hand, SK Hynix is expected to bring performance improvements with HBM despite market conditions such as the slowdown in the general-purpose memory cycle. HBM is a high-margin product that is 3 to 5 times more expensive than general-purpose DRAM.

SK Hynix supplies the largest amount of HBM to NVIDIA, a major customer that holds 80 percent of the AI semiconductor market. SK Hynix took the lead in supplying HBM3E 8-layer to NVIDIA earlier this year and was the first in the industry to start mass production of HBM3E 12-layer in September last year, with the goal of supplying it to customers within the year.

On the other hand, Samsung Electronics is still conducting quality tests to deliver HBM3E 8-layer and 12-layer products to NVIDIA. The industry predicts that Samsung Electronics will also deliver within the year.

Kim Hung-tae, a researcher at Shinhan Securities, said, “We have lowered SK Hynix's third-quarter earnings estimate due to lower-than-expected demand for mobile and PC memories, exchange rate effects, and one-time costs.” He diagnosed, “The upward trend in earnings is expected to be maintained with the replacement.” He added, “SK Hynix's HBM3E 12-layer volume production is more than a quarter faster than that of its competitors, so its competitive advantage is expected to continue to dominate the market.”

Previously, SK Hynix said in its Q2 conference call at the end of July that “in the third quarter of this year, HBM3E (Generation 5) shipments will significantly exceed HBM3 (Generation 4) shipments and will take half of the share.” HBM shipments.” “HBM sales this year will be lower than last year.” He expressed confidence and said, “We expect a 300% increase compared to this year, and next year's shipments will more than double this year's.”

This is not the first time SK Hynix has surpassed Samsung Electronics Semiconductor's operating profit. Last year, in the global semiconductor industry downturn, SK Hynix cut memory production in advance, and in the fourth quarter of last year before Samsung Electronics Semiconductor successfully turned a profit. In the first quarter of this year, SK Hynix recorded an operating profit of 2.886 trillion won, while Samsung Electronics DS division's operating profit exceeded 1.91 trillion won.