Samsung Faces Steep Profit Decline as AI Chip Demand Slows

Samsung Electronics has projected a dramatic 56% year-over-year decline in second-quarter operating profit, signaling significant challenges in the global semiconductor market. The South Korean tech giant estimates Q2 operating profit at 4.6 trillion KRW ($4.6 billion), far below both last year's 10.44 trillion KRW performance and the 6.26 trillion KRW forecast by financial analysts at LSEG.

Financial Performance Below Expectations

The company anticipates 74 trillion KRW in Q2 revenue, missing the 75.55 trillion KRW consensus estimate. This disappointing forecast triggered an immediate 1.13% drop in Samsung's share price during early trading sessions.

As the world's largest smartphone manufacturer and a leading memory chip producer, Samsung faces mounting pressure from multiple fronts:

• Inventory value adjustments impacting profitability
• U.S. restrictions on advanced AI chip exports to China
• Intensifying competition in high-bandwidth memory (HBM) chips

Competitive Pressures Mount in HBM Market

Industry analysts highlight Samsung's growing disadvantage against competitors like SK Hynix and Micron in the crucial HBM sector. MS Hwang, Research Director at Counterpoint Research, noted: "Disappointing performance stems from continuous losses in the foundry business, and the growth of the high-profit HBM business this quarter has been weak."

SK Hynix has emerged as a primary supplier to Nvidia, while Samsung's certification process for its latest HBM chips faces delays until at least September. Ray Wang of Futurum Group emphasized: "Samsung hasn't yet passed Nvidia's certification for its most advanced HBM - a critical setback given Nvidia accounts for 70% of global HBM demand."

Foundry Business Struggles Continue

Samsung's semiconductor foundry operations contend with:

• Weak order volumes
• Fierce competition from Taiwan Semiconductor Manufacturing Company (TSMC)
• Reported workforce reductions of up to 30% in some departments

Despite these challenges, Samsung Electronics' stock has shown resilience with a 16% year-to-date increase. The company plans to 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
• 🔌 Supply chain disruptions: U.S. AI chip export controls and inventory adjustments weigh on results
• 🏎️ HBM race lag: Competitors SK Hynix and Micron gain ground in high-bandwidth memory market
• 🏭 Foundry struggles: Weak orders and TSMC competition pressure semiconductor division