Samsung warned this week that its third-quarter profit would be lower than expected, but it wasn’t just an afterthought for the South Korean tech giant. This represents a tectonic shift in global technology trade, driven by increased demand for artificial intelligence (AI) products.
Samsung, once a leader in memory chips and consumer electronics, is rushing to adapt to the growing influence of AI. The struggle to catch up in the production of high-end AI chips highlights a broader issue for traditional tech giants: innovate quickly in AI or fall behind.
“As chips advance, the design and manufacturing processes are becoming much more complex,” Michelle Brophy, director of technology, media and telecommunications research at market intelligence firm AlphaSense, told PYMNTS. “Despite Taiwan Semiconductor being the clear market leader, major chip makers have not escaped growing pains.”
The technology giant estimates operating profit for the quarter ending Sept. 30 at 9.1 trillion won ($6.78 billion), compared with analysts’ estimates of 10.3 trillion won ($7.66 billion). is significantly below. The shortfall prompted a rare apology from Samsung executives, who acknowledged that the company faces headwinds in the rapidly evolving semiconductor landscape.
Demand for AI chips is rapidly increasing
At the heart of Samsung’s challenges are delays in its AI chip business with a major customer, widely believed to be Nvidia, according to Reuters. At the same time, the company is grappling with increasing competition from Chinese rivals in the traditional chip market. These setbacks come as demand for AI-optimized chips soars, forcing traditional semiconductor manufacturers to quickly adapt their product lines and production processes.
This shift is reshaping the map of global tech commerce. Companies specializing in AI-optimized chips are soaring in market value, while traditional semiconductor giants like Samsung and Intel are racing to catch up. The ripple effects extend beyond the chip industry to everything from smartphone production to cloud computing infrastructure.
In the memory chip market, where Samsung has long dominated, the company now faces stiff competition from smaller rival SK Hynix in the supply of high-bandwidth memory (HBM) chips essential for AI applications. Brophy said.
The impact on global commerce is profound. The race to develop AI capabilities could intensify competition between technology hubs such as Silicon Valley, Seoul, and China’s Shenzhen, and reshape global trade flows for high-tech products.
“Longer term, we expect growth in AI products and applications to provide tailwinds to the broader market,” Brophy said.
Additionally, the AI revolution is blurring traditional industry boundaries. Cloud service providers are advancing chip designs, and chip manufacturers are expanding into software and services. This convergence is forcing companies to rethink their business models and competitive strategies.
Impact on smartphones
The impact of AI will also extend to the smartphone market.
“AI will likely play a big role in reshaping the high-end smartphone market, both from a software and hardware perspective, because AI requires specialization,” Brophy told PYMNTS. “Samsung is well-positioned overall because we have the ability to support and scale our in-house development, design, and semiconductor foundry design.”
Samsung’s efforts to catch up in AI chip production and rethink its broader product strategy could lead the industry, with Samsung Vice Chairman Yong Hyun-jun pointing out that “these are testing times.”
How Samsung and its peers navigate these turbulent waters will shape the future of global technology commerce for years to come.
