Samsung’s Earnings Decline: Projected 56% Drop in Q2 Profit Amid AI Chip Developments
Samsung Electronics is bracing for a significant decline in its second-quarter operating profit, projecting a drop of over 50%. This downturn is primarily attributed to U.S. export restrictions on advanced AI chips to China and disappointing performance in its foundry operations. The company anticipates profits of 4.6 trillion won ($3.3 billion) for the April to June period, marking a staggering 56% decrease compared to the same quarter last year.
Profit Projections and Market Impact
In a recent regulatory filing, Samsung revealed its profit expectations for the second quarter, which reflect a 31% decline from the previous quarter. This forecast is notably lower than market predictions, falling 23.4% short of analysts’ average estimates. The company’s sales for the quarter are projected to reach 74 trillion won, remaining relatively stable year-on-year but declining by 6.5% from the first quarter. While Samsung has not disclosed net income or detailed segment performance, it has pointed to its chip division as the main contributor to this disappointing outlook. The company stated, “Profit fell quarter-on-quarter due to inventory value adjustments and the impact of U.S. restrictions on advanced AI chips for China.”
Impact of U.S. Export Restrictions
The U.S. government has intensified its restrictions on exporting advanced semiconductor technology to China, citing national security concerns related to potential military applications. These measures have led to underutilization of Samsung’s high-tech chip facilities, adversely affecting profitability. Analysts have noted a broader slowdown in Samsung’s foundry business, which has significantly impacted overall revenue. Tom Hsu from TrendForce commented that the sharp decline in profit and revenue is primarily due to the weak foundry sector, while the memory business has remained relatively stable.
Future Outlook Amid Challenges
Despite the current slump, Samsung remains cautiously optimistic about the latter half of 2025. The company expects to narrow its losses as factory utilization improves and demand recovers. Hsu indicated that memory chip prices and shipments are likely to rise, driven by strong demand from AI applications and data centers. However, performance from Samsung’s high-bandwidth memory (HBM) chips, essential for advanced AI processing, has not met expectations in the June quarter. Chae Min-sook from Korea Investment and Securities noted that falling NAND flash prices for data storage have further exacerbated losses.
Broader Economic Context
Samsung’s challenges come amid escalating trade tensions with the United States. Former President Donald Trump had previously warned South Korea of potential tariffs and urged global tech companies, including Samsung and Apple, to relocate manufacturing to the U.S. In response, South Korea has stated it is maintaining close communication with Washington to prevent additional duties, as the country is already facing tariffs on steel and automotive products. The weakening of the Korean won against the dollar in June may have also negatively impacted both sales and operating profit for Samsung.
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