Samsung Electronics Co. plans to drastically cut its chip executive jobs and restructure semiconductor-related operations as it struggles to compete with rivals such as SK Hynix Inc. and Micron Technology Inc. in the advanced memory segment amid the AI boom.

Samsung, the world’s top memory chipmaker based in South Korea, is conducting an audit of the memory department under its Device Solutions (DS) division, which oversees its semiconductor business.

People familiar with the matter said on Thursday that the review, directed by Vice Chairman Jun Young-hyun, the head of the DS division, will lead to significant job cuts at the president level.

A major executive reshuffle will be carried out during its year-end personnel changes, sources said.

They said the company will also streamline its foundry, or contract chipmaking business, which is losing trillions of won, and reorganize the Semiconductor Research Center, which is responsible for developing future chip technologies.

As of the second quarter, Samsung’s DS division had 438 executives, accounting for 38% of the company’s total 1,164 executives. The number of Samsung’s chip executives is more than double that of its crosstown competitor SK Hynix, which has 199 executives.

Many of Samsung’s chip executives were appointed during the semiconductor boom of 2017-2018. In recent years, however, when Samsung’s chip business competitiveness was put into question, there were no noticeable executive cuts.

In the upcoming year-end executive changes, Samsung will likely shuffle the leadership of the key three business units under the DS division – memory, foundry and System LSI – as well as the positions of chief technology officer and the heads of manufacturing and technology, sources said.

LOWER MEMORY PROFIT VS SK HYNIX LIKELY

Jun, who took the post in May, flagged a drastic corporate revamp on Tuesday after the company posted worse-than-expected preliminary third-quarter earnings.

In a rare public apology for weak business performance from the top executive level, he said: “The management leading the (memory) business is fully responsible, and we will take the lead in overcoming this crisis and making the third quarter’s weak earnings a turning point for the company.”

Industry officials said Samsung’s DRAM competitiveness has plummeted to the point where intense restructuring is necessary.

Although Samsung didn’t provide a divisional performance breakdown, analysts said its foundry business likely continued to lose money to the tune of 1.5 trillion won in the third quarter as it is struggling to compete with leader Taiwan Semiconductor Manufacturing Company Ltd. (TSMC), which counts Apple Inc. and Nvidia Corp. among its customers.

Samsung’s System LSI division, which makes logic and system chips, also likely posted 1.5 trillion won in losses.

Analysts said Samsung’s bread-and-butter memory business likely posted 5.5 trillion won in operating profit. If the figures are confirmed later this month, Samsung will post lower memory profit than SK Hynix for the first time.

SK, which produces only memory chips, DRAM and NAND, is widely expected to post an operating profit of 6.77 trillion won in the July-September quarter.

HBM, ORIGIN OF SAMSUNG CRISIS

Through the drastic organizational revamp and executive job cuts, Samsung aims to uncover the reasons behind the weakening competitiveness of its semiconductor business, particularly in high-bandwidth memory (HBM).

Among the semiconductor Big Three – Samsung, SK Hynix and Micron – Samsung is the only company that doesn’t supply the latest AI chip, HBM3E, to Nvidia, the world’s top AI chip designer.

Currently, Samsung is supplying fourth-generation 8-layer HBM3 chips in small quantities to Nvidia.

SK Hynix, the world’s second-largest memory chipmaker and the HBM chip leader, has been supplying 8-layer HBM3 in large quantities since March and plans to supply a more advanced 12-layer version from the fourth quarter.

HBM3E, the most profitable memory semiconductor, is primarily used in Nvidia’s AI accelerators.

Concerns have also arisen regarding the competitiveness of Samsung’s general-purpose DRAM products, such as double data rate 5 (DDR5) DRAM and 5th-generation 10-nanometer DRAM D1B – both used as on-device AI chips.

“It is a positive sign that Samsung has recognized its problems and started working to address them,” said Park Jae-geun, a semiconductor engineering professor at Hanyang University.

Write to Jeong-Soo Hwang, Eui-Myung Park and Chae-Yeon Kim at hjs@hankyung.com
In-Soo Nam edited this article.