Impacted by weak sales of AI chips and other factors, South Korea’s Samsung Electronics announced on July 8 that it expects an operating profit of 4.6 trillion won (approximately 5.2 RMB per 1,000 won) for the second quarter of this year, marking a year-on-year decline of 55.94%. This figure falls short of the 6.36 trillion won average forecast by analysts surveyed by financial data provider FactSet. According to the Financial Times, this is the company’s lowest quarterly profit in six quarters. Analysts say the sharp drop has heightened investor concerns about Samsung’s ability to revive its semiconductor business.
In a statement, Samsung Electronics cited inventory value adjustments and U.S. restrictions on exporting advanced AI chips to China as the main reasons for the profit decline. Analysts also point to Samsung’s delayed supply of high-bandwidth memory (HBM) chips to its major U.S. customer Nvidia as a key factor. According to CNBC, Samsung has been lagging behind rivals like South Korea’s SK Hynix and the U.S.’s Micron in the HBM chip market.
HBM (High Bandwidth Memory) is an advanced memory chip technology widely used in high-performance computing areas such as AI chips.
Samsung Electronics did not disclose detailed earnings by division, but Reuters quoted analysts as saying that the company’s semiconductor division may have posted an operating profit of around 500 billion won, down more than 90% from the same period last year. Following the earnings release, Samsung’s stock price fell as much as 1.13% in early trading on Tuesday. As of July 7, Samsung’s stock had risen about 16% this year, lagging behind other major memory chip makers.
“Samsung Electronics’ semiconductor business is completely faltering,” Chosun Ilbo reported on July 9. Due to its sluggish response in the HBM chip segment—crucial for running AI—Samsung has ceded its throne in memory chips to SK Hynix. According to a recent report by Nikkei Asia, Samsung is also delaying completion of its semiconductor plant in Texas, U.S., because it is struggling to find enough local customers to absorb the output due to technical process issues.
At the same time, Samsung is also falling further behind its main rival TSMC in the semiconductor foundry (contract manufacturing) business. Chosun Ilbo noted that Samsung is facing difficulties with its 3-nanometer chips due to low yield rates. In the global foundry market for Q1 this year, TSMC held a 67.6% share, while Samsung lagged far behind at 7.7%. China’s SMIC, with a 6% share, is closing the gap.
International media outlets such as The Wall Street Journal and The Financial Times also highlighted growing concerns over Samsung’s smartphone and home appliance businesses, driven by uncertainty in U.S. trade policy. Just before Samsung released its earnings, former U.S. President Donald Trump posted a letter on social media to South Korean President Lee Jae-myung, announcing a 25% tariff on all South Korean exports to the U.S. starting August 1. In addition, the appreciation of the Korean won has weakened the price competitiveness of Samsung products; the won has risen about 7% against the U.S. dollar so far this year.
Still, some analysts believe Samsung’s performance may improve, supported by new smartphone launches and increased sales of HBM chips to customers like U.S.-based Broadcom. Samsung also expects its operating losses to narrow in the second half as demand gradually recovers.
Global demand for chips remains strong. The World Semiconductor Trade Statistics organization recently forecast that the global semiconductor market will reach $700.9 billion in 2025, an 11.2% increase year-over-year. However, some analysts warn that Samsung faces unprecedented competitive pressure, and whether it can make a timely breakthrough in AI chips will be key to reversing its declining performance.
Notably, accounting firm PwC recently warned that by 2035, around 32% of global semiconductor production could face disruption due to copper supply risks stemming from climate change—posing yet another uncertainty for the global chip industry.
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