Samsung Electronics is looking to make a comeback in the competitive AI chip market after it witnessed a significant fall in profits during the third quarter.

According to a report, South Korean tech giant Samsung Electronics reported an operating profit of 9.2 trillion won or $6.66 billion for July-September, marginally above its preliminary estimate but lower than 10.4 trillion won of the previous quarter.

The chip division, the biggest contributor to the company's overall earnings, saw its profit plunge to 3.9 trillion won from 6.5 trillion won in Q2.

The profits decline, roughly a 40% quarter-on-quarter, has sent investors into a tizzy, forcing Samsung to issue a rare public apology for its disappointing performance.

The company pointed to late commercialization of high-bandwidth memory chips, which are in demand for artificial intelligence applications, and increased competition with the Chinese offering traditional chips.

This has resulted in Samsung losing more ground to its other rivals like TSMC and SK Hynix, which just reported record earnings driven by sales of AI chips.

In fact, Samsung's Executive Vice President Jaejune Kim has recently addressed an earnings call with optimism about the sale of HBM3E chips in the near future, indicating that the product is gaining traction in the qualification process with a large customer, reportedly Nvidia, the market leader with a significant 80% share.

Analysts believe that the qualification of Samsung's HBM3E chips could turn out to be a major milestone in the company's semiconductor ambition, since qualification from Nvidia will be the critical one that would open the door into the AI chip market.
To deal with the problem, Samsung has focused on the production of high-end chips and hopes to receive better sales during the fourth quarter.

It feels that the falling demand of memory chips used in mobile devices and PC would somewhat balance with growth in AI markets.

Along with these, high bandwidth memory being the most pivotal component in AI and in data centers will also highlight the requirement for enhancement.

In addition to these factors mentioned above, there is something broader and that's adding pressure to the Korean smartphone manufacturer. Samsung's two main competitors are now outperforming, at the time of writing, Samsung. They're winning this contest in AI-related technology.
Samsung's mobile business revealed that the operating profit is at a low. Thus it also stresses how challenging an environment this is.
Struggling under this difficult stage, Samsung has had no other option but to have its operations and strategies review and adjustment.

Recently, it has done some readjustments of its workforce, downsizing in some regions, but looking for ways to better its technical competitiveness.
A new head for the semiconductor division, Jun Young-hyun, emphasized long-term improvements over short-term quick fixes to regain leadership again in the market.

Things are going to be really big for Samsung as it sets out to recover from the setback.

The company is looking to HBM3E chips as a turnaround strategy in the AI sector-a space that increasingly is thought to be the future of the chip market.

How things will actually play out in the future will have to wait for the quarterlies, where Samsung attempts to reposition itself as an industry shifts rapidly around it.