Understanding Samsung’s Profit Drop: Causes and Future Expectations

Samsung Sees Big Drop in Profits

Samsung Electronics is expecting a major decrease in its second-quarter operating profit. The company points to two main reasons:

• US export rules on advanced AI chips to China
• Poor performance in its chip-making business

Profit and Sales Numbers

Samsung predicts April-June profits of 4.6 trillion won ($3.3 billion). This is a huge 56% drop from last year. It’s also 31% less than the previous quarter.

• Profits are 23.4% below what experts expected
• Sales should reach 74 trillion won
• Sales are almost the same as last year but 6.5% lower than the first quarter

Why the Decline Happened

Samsung’s chip division is the main problem. Two key issues stand out:

• Changes in inventory value
• US restrictions on advanced AI chips for China

Washington has tightened rules on sending high-tech semiconductor technology to Beijing. These rules have left Samsung’s advanced chip facilities underused, hurting profits.

Slowdown in Chip-Making Business

Experts also see a broader slowdown in Samsung’s chip-making business. Tom Hsu from TrendForce said:

“The big profit and revenue drop is mostly due to the weak chip-making business. The memory business stayed fairly stable.”

Better Times Ahead in Late 2025

Despite the slump, Samsung is hopeful for the second half of 2025. The company expects to reduce losses as:

• Factory use improves
• Demand picks up

Prices and shipments of memory chips should go up. Strong demand from AI and data centers will drive this growth.

Problems with HBM Chips

Samsung’s HBM (high-bandwidth memory) chips, crucial for advanced AI processing, didn’t do well in the June quarter. Chae Min-sook from Korea Investment and Securities noted:

“HBM likely fell short of expectations. Falling NAND flash prices for data storage likely widened losses further.”

The weakening Korean won against the dollar in June may have also hurt both sales and operating profit.

Trade Issues with the United States

Samsung’s troubles come amid growing trade tensions with the United States. US President Donald Trump has warned of 25% tariffs. He has also asked global tech firms, including Samsung and Apple, to move manufacturing to the US.

South Korea, already facing taxes on steel and cars, said it is talking closely with Washington to avoid new duties.