(Bloomberg) -- Samsung Electronics Co. is replacing the head of its semiconductor arm, appointing a longtime memory chip veteran to spearhead efforts to catch up with SK Hynix Inc. in the booming AI arena.

Korea’s largest company named Jun Young Hyun the new leader of its most important business line. He replaces Kyung Kye-hyun, who will head up Samsung’s Advanced Institute of Technology and the future business team. Jun, 63, joined the division in 2000 and helped the company develop its basic DRAM and flash memory chips for smartphones and servers.

The appointment comes after Kyung offered to step down from his post, according to a person familiar with the matter, who asked not to be named discussing private information. Samsung has fallen behind SK Hynix in high-bandwidth memory or HBM chips, which have seen explosive growth because they are used for training artificial intelligence models like ChatGPT.

“It’s unusual for Samsung to do this management change in the middle of the year,” said Sanjeev Rana, an analyst at CLSA Securities Korea. “This highlights Samsung’s desperate attempt to inject new energy and fresh thinking into its semiconductor business where its lead has been slipping away.”

Investors have become increasingly concerned about Samsung’s response to its smaller rival, which recently reported its fastest pace of revenue growth since at least 2010. That’s propelled a 36% SK Hynix share rally since the start of 2024, far outpacing a Samsung stock that’s little changed.

The stock market reaction was initially muted on Tuesday. Samsung’s shares held their decline after the announcement and were down less than 1%. SK Hynix rose 1.1%.

SK Hynix is the biggest supplier of memory used to develop ChatGPT-like services around the world. Its production capacity for such chips is almost fully booked through next year.

It plans to spend about $14.6 billion building a new complex in South Korea to meet demand for HBM chips, which work alongside Nvidia Corp. accelerators in creating and hosting AI platforms. It’s also erecting a $4 billion packaging facility in Indiana — its first in the US.

Read more: SK Hynix Gains HBM Crown, But $23 Billion Debt Hard to Reduce

Samsung, which also makes logic chips and operates a foundry business, has also embarked on a global expansion that encompasses a $40 billion investment in US chipmaking. 

In the foundry business, Samsung has struggled to win big customers and narrow Taiwan Semiconductor Manufacturing Co.’s overwhelming lead in producing advanced chips.

Jun’s appointment comes at an age when most Samsung executives retire, CLSA’s Rana said. “His expertise was deemed necessary to help Samsung navigate the current challenging situation,” he said.

Samsung has begun mass production of its latest HBM product, eight-layer HBM3E, and says it plans to mass produce 12-layer HBM chips in the second quarter. The company expects its supply of HBM to increase by at least three times in 2024 compared with last year.

Read More: Samsung’s Profit Surges After AI Boom Reverses Chip Losses 

--With assistance from Youkyung Lee.

(Updates with details and analyst commentary.)

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