Shares of Samsung Electronics, the world’s leading memory chipmaker, have plunged to their lowest level in over four years, a sharp reflection of the growing challenges the South Korean tech giant faces amid a combination of external geopolitical pressures and internal market struggles. The sharp downturn has placed Samsung at the bottom of the global chipmaker performance rankings, with rivals such as Taiwan Semiconductor Manufacturing Company (TSMC) and Nvidia outpacing it despite the soaring demand for artificial intelligence (AI) chips.
The primary concern that analysts are highlighting is the threat of U.S. tariffs under the potential return of a Donald Trump administration. Trump has threatened to impose universal tariffs of 10% on all imports and a significantly higher 60% tariff on Chinese products. Samsung, which has a substantial reliance on Chinese customers for its chip sales, stands to be hit hardest if these tariffs come into play. In contrast, its main rival, SK Hynix, has been diversifying its customer base, increasing its sales of high-end AI chips to U.S. customers, including major players like Nvidia.
Lee Min-hee, an analyst at BNK Investment & Securities, pointed out that SK Hynix has been better positioned to take advantage of the surge in AI-related chip demand due to its growing customer base in the U.S. As demand for AI chips accelerates, the need for memory chips for AI servers has skyrocketed, a market that Hynix has managed to capture more efficiently compared to Samsung. Meanwhile, Samsung has lagged in adapting to this shift in market demands, focusing heavily on its traditional memory chip business, which, while still dominant, faces slower growth compared to the AI sector.
Further compounding Samsung’s woes are the broader implications of Trump’s proposed tariffs. If implemented, these tariffs could result in reduced demand for electronics that rely on chips, such as smartphones, laptops, and other consumer devices. This could place additional downward pressure on Samsung’s sales, particularly as it faces stiff competition from Chinese rivals that could lower their prices to remain competitive in the global market. In a worst-case scenario, this could erode Samsung’s market share both domestically and overseas.
Greg Noh, an analyst at Hyundai Motor Securities, also highlighted the risk of China responding to the tariffs by slashing its export prices. Such a move would place additional pressure on Samsung’s pricing power, especially in markets where competition is already fierce. Samsung’s heavy dependence on Chinese customers means that any weakening of demand or price reduction by Chinese competitors could significantly hurt the company’s bottom line.
Last week, South Korean President Yoon Suk Yeol echoed these concerns, warning that the potential imposition of high tariffs on Chinese imports could lead to Chinese competitors aggressively undercutting prices, further squeezing Korean chipmakers in foreign markets. The potential for such a price war could be damaging to companies like Samsung, which are already grappling with slowing demand in their traditional markets.
Despite these challenges, Samsung has a resilient brand and a history of navigating through market downturns. The company is also making strides in other areas, including the development of next-generation semiconductor technologies and diversifying its AI chip offerings. However, analysts remain cautious, urging that Samsung must accelerate its focus on AI chip production to remain competitive in an industry that is shifting toward AI applications at an unprecedented rate.
As Samsung’s stock continues to struggle, the company faces an urgent need to adjust its strategies. If it hopes to retain its position as a global leader in the chip industry, Samsung must navigate the complex intersection of U.S. trade policies, AI chip demands, and intensifying competition in both the Chinese and American markets.
