“Completed the development of the world’s first 20-nanometer DRAM.” This confident statement opened Samsung Electronics’ semiconductor business description in its 2014 business report. A decade later, the tone has shifted significantly. In its semiannual report released on Aug. 14, 2024, the outlook was far more cautious: “Given the increase in customer component inventory in the first half, there is a possibility that demand growth in the second half may be limited.”
Companies typically release quarterly, semiannual, and annual business reports that include key indicators like revenue and operating profit, along with updates and forecasts for major business segments. The “Business Overview” section of these reports reflects the company’s self-assessment. An analysis of Samsung’s semiconductor business reports over the last 10 years shows that the phrase “world’s first” has been absent since the 2020 report. The 2019 report was the last to mention Samsung’s development of the world’s first third-generation 10-nanometer DRAM, signaling internal concerns about maintaining technological leadership.
In 2014, Samsung’s business report summarized the semiconductor segment in five sentences, beginning with, “We completed the development of the world’s first 20-nanometer DRAM, securing a technology and cost competitiveness lead of over 1.5 years compared to competitors.” The report concluded with a pledge to continue leading the market as the top memory producer. Until 2019, each report started by introducing a new, world-first product and highlighting how far ahead it was of competitors.
For example, the 2016 report stated, “We launched the world’s first 10-nanometer DRAM, securing a lead of over one year compared to competitors,” emphasizing the company’s “absolute dominance in the DRAM market” through the development of differentiated 10-nanometer products and next-generation DRAM. In 2018, the focus was on the world’s first second-generation 10-nanometer DRAM, and in 2019, on the third-generation version.
During this period, Samsung’s semiconductor division achieved significant success. In 2017, driven by a booming memory market, Samsung overtook Intel as the world’s leading semiconductor company—a title Intel had held for over 30 years. Samsung’s Device Solutions (DS) division saw operating profit soar from 9.43 trillion won in 2014 to 46.52 trillion won in 2018, with the operating profit margin climbing from 7.2% in 2014 to 19.4% in 2018.
In 2020, Samsung acknowledged the challenging market conditions brought on by the COVID-19 pandemic but remained optimistic, stating, “By being the first to secure core technologies for next-generation DRAM development, we have once again pushed the limits of semiconductor miniaturization.” The company expressed confidence in “enhancing cost competitiveness and strengthening the performance, characteristics, and quality of our products to lead the market.”
However, in 2021 and 2022, the company stopped mentioning world-first technologies, instead focusing on “consolidating market leadership.” By 2023, even the term “market leadership” was absent from the reports.
The 2023 business report, reflecting a 15 trillion won loss in the DS division, began by stating, “In the first half of 2023, memory demand remained weak due to inventory adjustments by customers, leading all suppliers to adjust production volumes.” It concluded by noting that “although market recovery is slow, we aim to lay the foundation for business expansion.”
Similarly, the semiannual report for 2024, which included unexpectedly strong second-quarter results, offered a cautious outlook for the semiconductor business: “While demand may continue due to the expansion of on-device AI support models and seasonal peak effects in PCs and mobile, second-half growth may be limited given the increase in customer component inventory in the first half.” The report also mentioned plans to “actively respond to demand for high-value AI-related products” and “enhance competitiveness in the HBM3E (fifth-generation HBM) market.”
The period when Samsung’s confident language disappeared from its reports coincided with a decline in its operating profit margin, particularly compared to competitors. In 2022, the year that marked the start of the AI era with the rise of ChatGPT, Samsung’s operating profit margin stood at 24.2%. By the first half of 2024, it had dropped to 16.2%. In contrast, SK Hynix, which supplies HBM to Nvidia, the dominant player in the AI accelerator market, saw its operating profit margin soar from 15.3% in 2022 to 32.7% in the first half of 2023.
