Samsung announces second shake-up of struggling chip business

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Samsung Electronics has announced the second management shake-up of its chip division this year, illustrating the turmoil at the South Korean tech giant as it faces growing concern over its technological competitiveness in advanced memory chips used in artificial intelligence hardware.

Jun Young-hyun, who was installed as head of the semiconductor unit in the previous reshuffle in May and has acknowledged the company’s “chip crisis”, will serve as the new head of its memory chip business and co-chief executive. This gives Jun direct oversight of the memory chip business.

Among other changes, executive vice-president Han Jin-man, previously in charge of Samsung’s US semiconductor business, was promoted to lead its struggling foundry unit, which makes chips for third parties.

Wednesday’s moves come as the world’s largest memory chipmaker faces growing investor concern about its poor performance in advanced AI memory chips, as well as increasing losses in the contract chipmaking business as it struggles to close the gap on market leader TSMC.

The highly anticipated reshuffle at the top of the world’s largest memory chipmaker came after Samsung’s hereditary chair Lee Jae-yong this week publicly acknowledged for the first time “the grave concerns about the future of Samsung”.

“The reality we are facing is more challenging than ever, but we will overcome the current difficult situation and take a step forward,” Lee said on Monday during his latest criminal trial.

Analysts said Samsung’s reshuffle was “disappointing”, as the tech group was continuing to rely on existing veterans rather than bringing in external talent.

“It seems difficult for Lee Jae-yong to overhaul the organisation to boost the company’s performance, as he is still wrestling with his legal cases,” said Park Ju-geun, head of Seoul-based research group Leaders Index. “I doubt if Samsung can push for reform with this relatively small reshuffle.”

But he added: “Jun also serving as the head of the memory business can streamline the decision-making process and may help accelerate tech development.”

Prosecutors are seeking a five-year jail term for Lee, as they appeal against his acquittal in February of accounting fraud and stock manipulation relating to the controversial merger of two key affiliates to help cement his control over Samsung Electronics.

“I will do everything in my power to ensure that Samsung can, once again, become a company beloved by the people,” Lee told the court. “I humbly ask for the opportunity to focus entirely on this mission.”

Jun had already made a rare public apology last month for the company’s poor performance after Samsung’s semiconductor business reported a 40 per cent quarter-on-quarter decline in July to September operating profit.

Samsung’s share price has fallen more than 25 per cent so far this year as it lags smaller crosstown rival SK Hynix in the race to produce high bandwidth memory chips used in Nvidia’s AI hardware. Samsung shares fell 2.9 per cent on Wednesday afternoon, underperforming the benchmark Kospi index, which was little changed.

The election of Donald Trump as the next US president has also raised the prospect of tightened restrictions on transfers of equipment and sales of advanced memory chips to China, where Samsung operates the world’s largest Nand flash manufacturing facility.

Trump nominees have also raised questions over US subsidies provisionally granted to foreign chipmakers by Joe Biden’s outgoing administration.

Vivek Ramaswamy, nominated by Trump to co-head a new Department of Government Efficiency, this week strongly criticised the “wasteful subsidies” being offered by the Biden administration under its flagship Chips Act, through which Samsung is set to receive up to $6.4bn in funding for its investments in chipmaking and advanced packaging facilities in Texas.