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The red light is on for Samsung Electronics

Published: 10 Oct. 2024, 20:05

AN HYO-SEONG
The author is a stock market news reporter of the JoongAng Ilbo.

After the theory of semiconductor winter swept through the stock market, people now talk about winter only for Samsung Electronics. “It is not a winter for semiconductors, but we are already experiencing winter for Samsung Electronics,” said Noh Geun-chang, head of a research center at Hyundai Motor Securities. His analysis shows that a winter of the overall semiconductor market will not come, thanks to the demand for AI-related semiconductors. But the analysis suggests that Samsung’ winter is in progress as it failed to prove its competitiveness for high bandwidth memory (HBM).

Domestic investors who bought Samsung Electronics’ stocks are also going through a hard time. The stock price, which rose to 87,000 won ($64) in early July, fell to 60,300 won on Oct. 8. It is not just the falling stock price that disturbs investors. Stock prices can fluctuate depending on market conditions, but many analysts say that the red light is on for Samsung Electronics’ competitiveness.

Perhaps domestic individual investors have trusted Samsung Electronics too much until now. The chip giant’s 10-year sales growth rate is only 1 percent per year on average in dollars. Other than the acquisition of Harman in 2017, the business has not changed much. There’s little room for the stock market to highly rate a company that has been selling the same product for 10 years and has stagnant sales.

The head of an investment advisory firm told me in mid-July that it’s been a long time since he stopped paying attention to Samsung Electronics’ stocks. The reasoning is that Samsung’s core businesses — such as memory chips, smartphones and foundry — are all exposed to competition, and competitiveness of smartphones is gradually falling. When there are many other companies with monopolistic status, there’s no reason to adhere to Samsung Electronics.

Investors can choose to not cling to Samsung and buy Nvidia and Apple stocks, but the problem is the Korean economy. Samsung Electronics has a huge impact on all areas of Korea’s exports, investment and employment. On Oct. 8, Jun Young-hyun, head of Samsung Electronics’ semiconductor division, issued an apology saying, “Samsung has made investors worry about its fundamental technological competitiveness and the future of the company.” As promised in the apology, I hope that Samsung Electronics will regain its fundamental competitiveness in technology and enjoy another spring.