Samsung's Mobile AI event overshadowed by worker strikes despite a 1,400% profit jump

As the world prepares for a Samsung-sponsored Summer Olympics in Paris, the City is also hosting the Samsung Unpacked 2024 event. Predictably, everything is geared towards a new era of mobile AI. New devices include the Galaxy Z Fold 6, Flip 6, and Galaxy Watch 7. The stage is also set for the health-orientated Galaxy Ring, which is expected to be a big hit as audiences worldwide soak up a summer of sport.

Right before the Unpacked event, Samsung announced that it was looking at a staggering profit increase of 1,400% in Q2 2024 compared to the same period in the last fiscal year. Its regulatory filing revealed that profits would rise to 10.4 trillion won – equivalent to $7.54 billion – from earnings of 670 billion won posted last year.

Sales will also likely see a 23.3% bump to 74 trillion won, with another batch of smartphones and tech wearables scheduled for release in the coming months.

However, this remarkable increase is unrelated to the latest shiny devices showcased in Paris at Unpacked 2024. The growth is primarily driven by the AI gold rush, which has significantly increased demand for advanced chips.

The company's success is further bolstered by its strong position in high-capacity SSDs, crucial for AI applications. According to TrendForce analyst Avril Wu, "The development of AI has driven the demand for high-capacity SSD."

Inexorably changing the fate of the semiconductor segment, South Korea's chip exports surged to the highest in two years, at $11.7 billion in March 2024.

Paris event overshadowed by strikes and worker demands

Looking behind the curtain of the Samsung Unpacked Event in Paris, the contrast between Samsung Electronics' soaring profits and its labor unrest is quite literally striking. Although it had predicted an astounding 1,400% growth in Q2 profits, thousands of Samsung workers walked off the assembly lines demanding better working conditions.

The three-day strike of the National Samsung Electronics Union, representing about a quarter of the South Korean workforce, was called to demand better pay, more leave, and an overhaul of bonuses. The contrast shows how this tension between corporate success and employee satisfaction is increasing in the tech industry.

Despite Samsung estimating a dramatic surge in second-quarter operating profit, union officials argue that rank-and-file workers are not seeing equitable benefits. While unlikely to significantly impact production due to automation and low participation, the strike symbolizes a pivotal moment for Samsung as it navigates both the opportunities of the AI era and the evolving expectations of its workforce.

Samsung's uphill battle in the HBM market

Following a sharp 95% drop in operating profit last year due to weakened demand for chips across various devices, from computers to cars and smartphones, the recent surge in generative AI technologies like ChatGPT and Sora has ignited a universal demand for computing power, significantly boosting memory chip prices.

The demand for high bandwidth memory (HBM) chips, crucial for powering advanced AI chipsets and data center servers, has dramatically increased, driving a broad recovery in the semiconductor industry.

As these chips become integral to devices running sophisticated AI services, manufacturers like SK Hynix and Micron Technology have seen their production capacities maxed out for the foreseeable future. Both companies, key suppliers to Nvidia, have reported that their HBM chip allocations are booked solid through the following year, underscoring this technology sector's intense demand and competitive landscape.

However, Samsung Electronics finds itself challenged amidst this rising demand. Despite its efforts, Samsung's latest iterations of HBM chips still need to meet the stringent qualification standards set by Nvidia, a major player whose approval could significantly boost Samsung's market share and credibility in this high-stakes market.

Nvidia's CEO Jensen Huang noted last month that Samsung's HBM chips "still require additional engineering work." This situation disadvantages Samsung as it needs to catch up with its competitors, who are already fulfilling substantial orders. This could impact Samsung's growth and standing in the rapidly evolving semiconductor market.

The real cost of Samsung's AI expansion

Against the Olympic spirit currently unfolding in Paris, Samsung unveiled its latest mobile AI innovations – but we're hit with a stark contrast of fortunes. Profits surged by 1,400% on the insatiable appetite for AI chips. Still, images of thousands of workers walking off the assembly lines, fighting for better conditions and fair compensation, painted a different picture. This juxtaposition raises critical questions about the actual beneficiaries of the AI revolution.

While companies tout AI as a "copilot" for humanity, enhancing our capabilities and improving our lives, reality tells a different story. Are we witnessing history repeat itself, where technological progress comes at the expense of human welfare? Or is this instead an opportunity that will define technology companies' ability to fundamentally reframe their relationship with workers and ensure that the gains of progress in AI are shared equitably?

With the latest AI-powered gadgets dominating our newsfeeds, now is the time to consider the actual human cost of our technological future. The accurate measure of AI's success may not lie in profit margins or processing power but in its ability to elevate the human condition – starting with those who bring these innovations to life.

Can a balance be struck that genuinely benefits both the innovators and the workers, or are we destined to see the gap between the corporate boardroom and the factory floor widen?