Samsung's Q2 Profit Plummets Amid AI Chip Challenges and US Trade Restrictions

Reviewed byNidhi Govil

21 Sources

Samsung Electronics forecasts a 56% drop in Q2 operating profit, facing challenges in AI chip production and US trade restrictions, while competitors benefit from the AI boom.

Samsung's Profit Plunge and AI Chip Challenges

Samsung Electronics, the world's largest memory chipmaker, has projected a significant 56% drop in its second-quarter operating profit for 2025, falling far short of market expectations 1. The company estimates an operating profit of 4.6 trillion won ($3.3 billion) for the April-June period, marking its weakest performance in six quarters and fourth consecutive quarterly decline 2.

Source: Reuters

Source: Reuters

AI Chip Supply Challenges

A key factor contributing to Samsung's disappointing performance is its struggle to supply advanced high-bandwidth memory (HBM) chips to artificial intelligence leader Nvidia 1. While Samsung has begun supplying its HBM3E chips to AMD and Broadcom, it has yet to secure Nvidia's approval, a critical step for regaining momentum in the fast-growing AI hardware market 4.

Competitors Gaining Ground

In contrast to Samsung's struggles, competitors such as SK Hynix and Micron Technology are benefiting from robust demand for HBM chips used in AI applications. SK Hynix, Nvidia's primary supplier, is expecting record quarterly earnings, while Micron has projected stronger-than-expected revenue due to booming HBM demand 2.

Impact of US Trade Restrictions

Samsung's performance has been further impacted by US export restrictions on advanced AI chips bound for China. The company's device solutions division, which includes its semiconductor business, reported a quarter-on-quarter decline in profit due to inventory value adjustments and the impact of these restrictions 5.

Foundry Business Challenges

Analysts estimate that Samsung lost more than 4 trillion won in foundry operations during the first half of the year. The company has struggled to attract major customers for its contract chip manufacturing business due to poor production yields and a widening technology gap with industry leader TSMC 2.

Source: Financial Times News

Source: Financial Times News

Market Performance and Future Outlook

Samsung's shares have underperformed compared to its competitors, rising just 20% this year, while SK Hynix shares have surged almost 60% 2. Despite the current challenges, analysts expect Samsung's earnings to rebound in the third quarter, with the company's ability to supply HBM chips to Nvidia and overall chip demand recovery being crucial factors 5.

Additional Challenges

Samsung faces further headwinds from US tariffs affecting sales of TVs and home appliances, as well as a stronger Korean won eroding its price competitiveness 5. The company is also contending with increased competition from Chinese firms like ChangXin Memory Technologies and Huawei, which are ramping up HBM chip production 5.

Source: Fortune

Source: Fortune

As Samsung navigates these challenges, the tech giant remains under pressure to close the gap with rivals and adapt to an increasingly complex global trade environment. The company is set to report its full second-quarter earnings on July 31, which will provide more detailed insights into its performance across various business segments 5.

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