Samsung Faces Steep Profit Decline as AI Chip Challenges Mount

Samsung Electronics has projected a dramatic 56% year-over-year decline in second-quarter operating profit, according to financial forecasts released Tuesday. The tech giant anticipates Q2 profits of approximately 4.6 trillion KRW ($4.6 billion), far below both last year's 10.44 trillion KRW performance and the 6.26 trillion KRW predicted by LSEG analysts.

The company also revised its revenue forecast downward to 74 trillion KRW, missing the 75.55 trillion KRW market expectation. This disappointing outlook triggered an immediate 1.13% stock price drop in early trading.

Competitive Pressures in Memory Chip Market

As the world's leading smartphone manufacturer and a major memory chip producer, Samsung faces mounting challenges:

• Inventory value adjustments impacting profitability
• US restrictions on advanced AI chip exports to China
• Falling behind competitors (SK Hynix, Micron) in high-bandwidth memory (HBM) chips

"The disappointing performance stems from continuous losses in the foundry business," noted MS Hwang, Research Director at Counterpoint Research. "Growth in the high-margin HBM sector has been particularly weak this quarter."

Certification Delays Hamper Nvidia Partnership

Industry analysts highlight Samsung's struggle to secure certification for its latest HBM chips, now delayed until at least September:

• SK Hynix has emerged as Nvidia's primary supplier
• Nvidia drives 70% of global HBM demand, per Futurum Group data
• Samsung's improved HBM products remain in customer evaluation phase

"Samsung hasn't cleared Nvidia's certification for its most advanced HBM," said Ray Wang of Futurum Group. "This bottleneck severely limits their near-term growth potential."

Additional Business Challenges

The company faces headwinds across multiple divisions:

• Chip foundry business suffers from weak orders and competition with TSMC
• Reports indicate planned 30% staff reductions in some global subsidiaries
• Despite challenges, Samsung stock has gained 16% year-to-date

The company will release detailed Q3 financial results later this month.

Key Points:

🔹 56% profit plunge: Samsung forecasts $4.6B Q2 operating profit vs $10.44B last year
🔹 Market underperformance: Results fall short of analyst expectations
🔹 AI chip struggles: US-China restrictions and HBM competition hurt margins
🔹 Nvidia delay: Certification setback limits access to key AI chip market