Samsung's Q1 Profit Expected to Drop 21% Amid AI Chip Challenges and Foundry Losses

Samsung Q1 profit to drop 21% on weak AI chip sales, foundry losses

SEOUL, April 7 (Reuters) - Samsung Electronics (005930.KS), opens new tab is expected to forecast a 21% drop in the first quarter profit on Tuesday, hurt by sluggish sales of artificial intelligence chips and continued losses in its contract chip manufacturing business. The world's biggest maker of memory chips, in the midst of a management reshuffle following the sudden death of co-CEO Han Jong-Hee in late March, is due to report preliminary first-quarter earnings on Tuesday. Samsung has been grappling with falling chip profits since the middle of last year as it fell behind key rival SK Hynix (000660.KS), opens new tab in supplying high-performance memory chips to AI chip leader Nvidia (NVDA.O), opens new tab. Its struggle in the high-end market has left the South Korean tech giant heavily reliant on customers in China looking for less advanced products that are not subject to U.S. export restrictions. Ryu Young-ho, a senior analyst at NH Investment & Securities, estimated that AI chip demand from Chinese customers dropped in the first quarter after front-loading in the previous quarter in anticipation of more U.S. sales restrictions. "The share of HBM chips in Samsung's overall DRAM shipments may have declined slightly in the first quarter, leading to an expected decrease in DRAM profitability," he said, referring to high bandwidth memory (HBM) chips used to make AI chipsets. Samsung is projected to report 5.2 trillion won ($3.62 billion) in the January-March quarter operating profit, according to LSEG SmartEstimate. It reported a 6.6 trillion won profit in the same period a year ago. While Samsung is working on a redesigned version of its most advanced HBM chips to supply key clients, its relatively heavy exposure to commodity chips has made its profitability more vulnerable to volatile prices, analysts said. Prices of some DRAM memory chips, widely used in smartphones and PCs, fell by about 25% in the first quarter over the year, and prices for NAND flash chips, used in data storage, fell around 50% during the same period, according to TrendForce data. As a result, Samsung is again expected to underperform SK Hynix, whose profit is expected to more than double from a year earlier, LSEG data showed, benefiting from robust AI chip demand. Sweeping reciprocal tariffs imposed by U.S. President Donald Trump on its trading partners are also set to raise costs for Samsung's various products ranging from smartphones to TVs, laptops and home appliances. "Samsung could look to diversify its production base ... as part of its mid-to-long-term strategy. However, that isn't something that can be done within a year or two," said Jeff Kim, head of research at KB Securities. "If tariffs on consumer electronic devices, such as smartphones, persist, they will inevitably impact consumer demand." In its contract chip manufacturing business, Samsung is likely to further delay the start-up of its new U.S. factory to 2027 from 2026, as it has yet to win major production orders, keeping its foundry business in the red, analysts said. Samsung originally planned to open the plant in 2024. Estimated Q1 operating profit at Samsung's chip division was 1.7 trillion won, according to LSEG data, versus 1.9 trillion won a year ago. Samsung's mobile and network business is likely to report 3.7 trillion won in profit, up from from 3.5 trillion won a year ago, helped by increased smartphone shipments and a plunge in local currency that increases repatriated earnings. ($1 = 1,435.9000 won) Reporting by Heekyong Yang; Editing by Miyoung Kim and Sonali Paul Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

Samsung's Q1 profit expected to dropover sluggish AI chip sales By Investing.com

Investing.com -- Samsung (LON:0593xq) Electronics (KS:005930), the world's largest memory chip manufacturer, is anticipated to report a 21% decline in profit for the first quarter on Tuesday. The decrease is attributed to slow sales of artificial intelligence chips and ongoing losses in the company's contract chip manufacturing business. The tech giant, currently undergoing a management reshuffle following the unexpected passing of co-CEO Han Jong-Hee in late March, is scheduled to announce preliminary first-quarter earnings on Tuesday. According to LSEG SmartEstimate, Samsung is expected to report an operating profit of 5.2 trillion won ($3.62 billion) for the January-March quarter. This marks a decrease from the 6.6 trillion won profit reported in the same period last year. However, Samsung's mobile and network business is forecasted to report a profit of 3.7 trillion won, an increase from the 3.5 trillion won reported a year ago. This rise is attributed to an increase in smartphone shipments and a significant drop in the local currency, which boosts earnings repatriated back to the company.

Samsung Q1 profit to drop 21% on weak AI chip sales, foundry losses

SEOUL (Reuters) - Samsung Electronics is expected to forecast a 21% drop in the first quarter profit on Tuesday, hurt by sluggish sales of artificial intelligence chips and continued losses in its contract chip manufacturing business. The world's biggest maker of memory chips, in the midst of a management reshuffle following the sudden death of co-CEO Han Jong-Hee in late March, is due to report preliminary first-quarter earnings on Tuesday. Samsung has been grappling with falling chip profits since the middle of last year as it fell behind key rival SK Hynix in supplying high-performance memory chips to AI chip leader Nvidia. Its struggle in the high-end market has left the South Korean tech giant heavily reliant on customers in China looking for less advanced products that are not subject to U.S. export restrictions. Ryu Young-ho, a senior analyst at NH Investment & Securities, estimated that AI chip demand from Chinese customers dropped in the first quarter after front-loading in the previous quarter in anticipation of more U.S. sales restrictions. "The share of HBM chips in Samsung's overall DRAM shipments may have declined slightly in the first quarter, leading to an expected decrease in DRAM profitability," he said, referring to high bandwidth memory (HBM) chips used to make AI chipsets. Samsung is projected to report 5.2 trillion won ($3.62 billion) in the January-March quarter operating profit, according to LSEG SmartEstimate. It reported a 6.6 trillion won profit in the same period a year ago. While Samsung is working on a redesigned version of its most advanced HBM chips to supply key clients, its relatively heavy exposure to commodity chips has made its profitability more vulnerable to volatile prices, analysts said. Prices of some DRAM memory chips, widely used in smartphones and PCs, fell by about 25% in the first quarter over the year, and prices for NAND flash chips, used in data storage, fell around 50% during the same period, according to TrendForce data. As a result, Samsung is again expected to underperform SK Hynix, whose profit is expected to more than double from a year earlier, LSEG data showed, benefiting from robust AI chip demand. Sweeping reciprocal tariffs imposed by U.S. President Donald Trump on its trading partners are also set to raise costs for Samsung's various products ranging from smartphones to TVs, laptops and home appliances. "Samsung could look to diversify its production base ... as part of its mid-to-long-term strategy. However, that isn't something that can be done within a year or two," said Jeff Kim, head of research at KB Securities. "If tariffs on consumer electronic devices, such as smartphones, persist, they will inevitably impact consumer demand." In its contract chip manufacturing business, Samsung is likely to further delay the start-up of its new U.S. factory to 2027 from 2026, as it has yet to win major production orders, keeping its foundry business in the red, analysts said. Samsung originally planned to open the plant in 2024. Estimated Q1 operating profit at Samsung's chip division was 1.7 trillion won, according to LSEG data, versus 1.9 trillion won a year ago. Samsung's mobile and network business is likely to report 3.7 trillion won in profit, up from from 3.5 trillion won a year ago, helped by increased smartphone shipments and a plunge in local currency that increases repatriated earnings. (Reporting by Heekyong Yang; Editing by Miyoung Kim and Sonali Paul)

Samsung expects 21% drop in operating profit due to AI

Samsung Electronics is expected to report a 21% drop in Q1 operating profit on Tuesday, penalized by slowing sales of chips for artificial intelligence and persistent losses in its third-party semiconductor manufacturing business. Samsung Electronics, in the midst of a management reorganization following the sudden death of its co-CEO Han Jong-Hee at the end of March, is due to publish its preliminary results for the January-March period this Tuesday. Tough competition Since mid-2024, the South Korean electronics giant has seen its margins melt on memory chips, having lost ground to rival SK Hynix in the supply of high-performance components to Nvidia, leader in the AI chip segment. This delay at the top end of the market means that the Group is now more dependent on its Chinese customers, who are fond of less advanced products that are not affected by US export restrictions. Ryu Young-ho, senior analyst at NH Investment & Securities, believes that Chinese demand for AI chips declined in the first quarter, after a massive purchase in anticipation of tighter US restrictions. "The share of HBM chips in Samsung's DRAM shipments may have declined slightly, leading to an expected drop in profitability for this business," he said, referring to the high-bandwidth memory (HBM) used in AI chipsets. Samsung's Q1 operating profit is estimated at 5.2 trillion won ($3.62bn), compared with 6.6 trillion a year earlier, according to LSEG SmartEstimate. Although Samsung is working on a new version of its most advanced HBM chips to meet the expectations of its key customers, its marked exposure to standard chips makes it more vulnerable to price variations. According to TrendForce, prices for certain DRAM chips used in smartphones and PCs have fallen by around 25% year-on-year, while prices for NAND chips for storage have plunged by almost 50%. In the face of this, Samsung should once again be outstripped by SK Hynix, whose profits should more than double, boosted by strong demand for AI chips, again according to LSEG data. Tariffs complicate everything In addition, retaliatory tariffs put in place by former President Donald Trump are expected to add to the costs of Samsung products (smartphones, TVs, laptops and home appliances), according to analysts. "Samsung could look to diversify its production base as part of its medium- to long-term strategy, but this won't materialize for several years," commented Jeff Kim, head of research at KB Securities. He added that persistent tariffs on consumer electronics would inevitably weigh on demand. In the foundry sector, Samsung could postpone the start-up of its new plant in the USA to 2027, instead of 2026, due to a lack of major orders, keeping this activity loss-making. The initial launch was scheduled for 2024. Operating profit for Samsung's semiconductor division is estimated at 1.7 trillion won, compared with 1.9 trillion won a year earlier. By contrast, the mobile and network division is expected to report a profit of 3.7 trillion won, up from 3.5 trillion last year, boosted by higher smartphone shipments and the depreciation of the won, which boosts repatriated revenues.