[Editorial] Samsung Electronics posts record earnings; it must not rest on its laurels but double down on innovation

Samsung Electronics has delivered an earnings surprise that beat market expectations. It posted operating profit of 20 trillion won in the fourth quarter of last year, marking the strongest quarterly performance in about seven years since the third quarter of 2018. Annual revenue came to 332.77 trillion won, an all-time high. A surge in demand for memory semiconductors driven by the artificial intelligence (AI) boom powered the earnings jump. Prices of DRAM and NAND flash, including high-bandwidth memory (HBM), are soaring, so the upward trend in revenue is expected to continue for the time being. Some even project that this year’s operating profit could surpass 100 trillion won.
The company’s strong results are feeding through into a higher share price. We believe this is the payoff from efforts to diversify its customer base to include Nvidia, Advanced Micro Devices (AMD), Broadcom and others, while relentlessly pushing product innovation.
However, the better the business cycle, the more cool-headed the assessment must be. It needs to be examined closely whether the robust results stem mainly from Samsung Electronics’ own strengthened competitiveness or from a temporary semiconductor boom. Business competitiveness and market conditions cannot be discussed in complete isolation, but it is still necessary to distinguish which factor has had the greater impact on earnings.
During past memory super cycles, Samsung Electronics also reaped enormous operating profits. Yet as soon as those super cycles ended, the company suffered deteriorating results amid plunging semiconductor prices and oversupply. Because memory prices are highly volatile depending on supply and demand, the current market boom must not be mistaken for something permanent.
When earnings are strong, the company should all the more devote itself to innovation and bolstering competitiveness. It has long been pointed out that Samsung Electronics’ Achilles’ heel is that memory semiconductors account for about 80 percent of its operating profit. Its business portfolio is excessively skewed toward memory. As the latest results also show, its foundry business—touted as a future growth engine—has narrowed its losses but remains in the red. The present, when the memory market is booming, is precisely the time to raise the competitiveness of non-memory semiconductors and the foundry business. History shows that global companies that grew complacent at the peak eventually had to surrender their No. 1 position.
For Samsung to evolve into a truly top-tier global company, institutional support must accompany its own efforts. In an era of intensifying global competition, the political establishment not only fails to lend support but even throws up obstacles, as seen in the recent controversy over relocating facilities. Some politicians are making the absurd argument that the Yongin Advanced System Semiconductor National Industrial Complex, which Samsung Electronics is developing with an investment of 360 trillion won, should be moved to Honam.
They cite power supply issues as the reason, but this does not hold water. A company’s decision on where to locate a site is made with a long-term perspective, taking into account future risks. With construction already in full swing, politicians now telling the company what to do is, above all, an infringement on managerial autonomy.
In the semiconductor industry, speed is everything. Samsung Electronics must not be content with its record-breaking performance, but instead focus on investment for the future. At the same time, shaking Samsung’s footing for political reasons is tantamount to undermining the competitiveness of Korea’s semiconductor industry as a whole. The network of partner companies, the talent ecosystem, and the supply chains of global equipment makers that have been built up over decades cannot simply be overturned overnight. Politicians should abandon such reckless ideas and, together with the government, swiftly pass the Semiconductor Special Act to support the industry.