The Power of Apology: Samsung’s Regret to 4.67 Million Shareholders

Samsung’s stock price has also lost nearly one-fifth of its value in the past year, despite the global boom in demand for artificial intelligence (AI)-related hardware—a factor that has driven the growth of competitors.

In light of this, at the meeting, Samsung Electronics promised its shareholders that the company would achieve “meaningful achievements” in mergers and acquisitions (M&A) this year to restore growth.

Han Jong-hee, co-CEO of Samsung, apologized to all shareholders for the poor financial results, acknowledging that the company’s technological competitiveness has weakened in recent years. “We have not been able to gain a superior competitive edge in the market, leading to stagnant stock prices. I apologize for causing concern among shareholders,” he said.

“Implementing M&A in the semiconductor field is challenging due to various legal and national interest issues, but we are determined to achieve clear results this year,” Han pledged, emphasizing that the company will take concrete action to boost growth through mergers and acquisitions.

The shareholder meeting reflected the mounting pressure from investors (about 40% of Korean individual investors hold Samsung shares) as the company is urged to take more aggressive action to pursue M&A deals and address the threat of US tariffs on imported semiconductor chips.

Lee Jae-yong, the heir to the Samsung Group, recently told executives that the company is in a “do-or-die” situation, a “matter of survival” after the company recorded its first comprehensive market share decline in a decade.

According to the 2024 financial report released last week, Samsung’s market share in the DRAM memory chip segment dropped from 42.2% to 41.5%. Its smartphone market share decreased from 19.7% to 18.3%.

The display panel segment for smartphones witnessed the steepest decline, falling from 50% to 41.3%, while the TV market share also slipped from 30.1% to 28.3% due to increasing pressure from Chinese competitors. The automotive technology products of its subsidiary, Harman, also saw a decrease in market share from 16.5% to 12.5%.

“The issue is not the crisis itself but our attitude in facing it,” Chairman Lee told the executives. “We must invest in the future, even if it affects short-term profits.”

The main complaints from investors revolved around Samsung’s lag in advanced memory chips. The company is falling behind smaller rivals such as SK Hynix and Micron Technology in the high-bandwidth memory (HBM) segment—a critical component in AI hardware.

Samsung Electronics is restructuring its engineering team to enhance competitiveness in the HBM field, but it has yet to pass the quality test to supply advanced memory products to Nvidia—the giant in AI chips.

“We are accelerating the development of technology to avoid repeating past mistakes,” said Jun Young-hyun, CEO of Samsung’s chip business, at the meeting.

Samsung’s foundry segment—which manufactures chips for external customers—is also suffering billions of dollars in losses as the company struggles to close the technological gap with its main rival, Taiwan Semiconductor Manufacturing Company (TSMC).

Samsung announced last year that it would build an advanced logic chip fabrication plant in Taylor, Texas, as part of a $40 billion investment plan. This plan also includes facilities for “advanced packaging” for AI chips. However, experts from Macquarie warn that the $17 billion factory in Taylor could become a “stranded asset” due to a lack of customers.

A source close to Samsung’s foundry operations said the company is caught in a “vicious cycle”—the low yield rate at the US plant makes it difficult for the company to secure large orders, which, in turn, makes it harder to improve the yield rate.

“We will strive to improve profits by further developing processing technology and addressing yield issues,” said Han Jin-man, head of Samsung’s foundry business.

PRESSURE

Samsung is also facing a threat from President Donald Trump, who has proposed imposing tariffs on imported semiconductor chips and revoking the $52 billion Chips Act—which includes a $4.75 billion subsidy for Samsung’s Taylor plant.

Meanwhile, TSMC has quickly responded to this threat by announcing plans to invest $100 billion to expand capacity at its US plants. This raises the question of whether Samsung is willing or able to make a similar move.

Samsung’s investors are also concerned about speculations from officials in the Trump administration that TSMC may help operate the fabrication plants of Samsung’s major rival, Intel.

“This is not good news for Samsung as competition will intensify if Intel’s foundry plants can achieve the same efficiency as TSMC,” said Ahn Ki-hyun, an executive at the Korea Semiconductor Association.

Daniel Kim, an analyst at Macquarie, warned that even if TSMC helps Intel get back in the race, the outlook for Samsung remains bleak as the company is cutting capital spending on its foundry business and downsizing its engineering team.

“Intel’s recovery will be a big challenge, even for TSMC. But Samsung’s situation is getting tougher as it reduces investment in its foundry business while its competitiveness is weakening,” Kim remarked.

At the annual general meeting, Samsung committed to expanding investments in robotics, healthcare technology, and next-generation semiconductors to drive AI-based growth. The company also forecasted that the memory chip cycle in the second half of the year would improve the group’s profits.

However, some investors believe that Samsung needs a strong restructuring of its management, which is perceived as too rigid. They emphasized that Lee Jae-yong, the group heir, still maintains tight control over the company’s leadership, even though he does not hold any position on the board of directors.

“Lee Jae-yong can influence the board of directors as a major shareholder, but he should not interfere in the company’s management,” said Chan Lee, managing partner at Petra Capital Management, a Seoul-based hedge fund and Samsung shareholder.

Chan Lee suggested that Samsung should empower CEOs with technical backgrounds—just as Lee’s father used to do:

“He should empower leaders with technical expertise. Instead, we are seeing high-ranking leaders from the financial sector focusing on short-term profits, weakening the company’s long-term competitiveness.”

Samsung’s commitment to expanding investments in AI, robotics, and healthcare technology indicates that the company is seeking new growth drivers beyond traditional businesses such as smartphones and TVs, which are under pressure from Chinese competitors.

A CRUCIAL BOTTLENECK TO BE ADDRESSED

The shareholders’ dissatisfaction reflects the challenges in Samsung’s management strategy. While competitors such as TSMC and Nvidia are quickly capturing market share in advanced chips, Samsung seems hindered by its centralized management structure and short-term profit-oriented strategy rather than long-term development.

If Samsung wants to regain its leadership in semiconductors and AI, investors believe that the company needs a profound transformation—not only in its business operations but also in its management structure and decision-making processes.

Vice Chairman Han Jong-hee, who chaired today’s meeting, affirmed, “Although external factors such as tariff issues present challenges, we will spare no effort to boost the stock price.”

More than 900 shareholders present at the general meeting raised questions and criticisms aimed at Samsung Electronics’ management regarding the current state of the business and the company’s future strategy.

Currently, Samsung Electronics has a total of 4,672,130 shareholders, reflecting the company’s appeal to individual and institutional investors.

According to Financial Times, Chosun