Samsung Electronics has stunned investors with a forecast of a 56% drop in second-quarter operating profit, as ongoing U.S. export restrictions on China and setbacks in supplying advanced AI memory chips to Nvidia take a heavy toll on the South Korean tech giant’s business. The company projected its April-to-June operating profit at Won4.6 trillion ($3.3 billion), marking its weakest performance in six quarters and falling well short of market expectations, according to Financial Times reports.
Samsung’s device solutions division, which includes its chip manufacturing operations, cited profit declines driven by inventory adjustments and the impact of U.S. restrictions on AI chip sales to China. The company’s sales remained steady at Won74 trillion but earnings took a significant hit.
A key factor dragging down Samsung’s performance is the delay in securing Nvidia’s approval for its latest HBM3E memory chips, essential components in AI computing. While smaller rivals SK Hynix and Micron Technology have capitalized on booming demand and reported robust sales of their advanced HBM chips, Samsung’s chip business has struggled to break through. Although Samsung recently began supplying HBM3E chips to AMD and Broadcom, Nvidia—the dominant AI chipmaker—has yet to greenlight Samsung’s products.
The market reaction was swift: Samsung shares fell 0.6% following the announcement, while SK Hynix’s stock jumped 3.3% in morning trading. Samsung’s share of South Korea’s Kospi index recently hit its lowest level in nine years, highlighting investor concerns.
Meanwhile, competitors have thrived. Micron projected stronger-than-expected quarterly revenues fueled by high HBM chip demand, and SK Hynix, Nvidia’s primary HBM supplier, is on track to report record earnings.
Samsung disclosed that its improved HBM chips are under customer evaluation and being shipped, but it did not specify which clients have adopted the new technology.
The foundry business also suffered significantly, with analysts estimating over Won4 trillion in losses during the first half of the year due to weak demand and production issues. U.S. export controls restricting AI chip sales to China compounded these losses by limiting Samsung’s ability to serve key customers.
“The non-memory business experienced a decline in earnings due to sales restrictions and related inventory value adjustments stemming from U.S. export restrictions on advanced AI chips for China, as well as continued low utilization rates,” Samsung stated.
Industry analysts expect a recovery in the second half of the year, with DS Investment & Securities noting that “earnings will probably rebound in the third quarter after hitting the bottom in the second.” The company’s ability to improve HBM supply to Nvidia and broader chip market demand are seen as critical factors.
Despite challenges, Samsung reported that its exports to China surged 54% between 2023 and 2024 as Chinese firms stockpiled AI chips ahead of tightening U.S. controls. However, other product lines face headwinds: U.S. tariffs have dented sales of Samsung’s TVs and appliances, and a 7% appreciation of the Korean won against the dollar this year has further pressured price competitiveness.
To bolster its smartphone business, Samsung plans to launch thinner foldable devices in New York this week. Although global shipments of foldable phones rose 12% last year to 17.2 million units, Samsung’s market share declined from 54% to 45%, underscoring intensifying competition.
