Semiconductor and smartphone giant Samsung Electronic Co. Ltd. said on Tuesday morning in South Korea that it’s anticipating its second-quarter profit to plunge 56% from a year earlier, blaming it on sluggish sales in its chip business and the impacts of U.S. trade restrictions.
The forecast comes in much lower than what analysts had expected. Samsung said in a preliminary earnings statement that it’s expecting a second-quarter operating profit of 4.59 trillion won ($3.4 billion), down sharply from the 10.44 trillion won profit it posted in the year-ago period. Analysts had been targeting a profit of 6.2 trillion won, Reuters reported.
On a sequential basis, Samsung’s profit is expected to drop by around 31%, from 6.69 trillion won. Revenue for the period is expected to come to 74 trillion won, more or less flat from a year earlier.
In a separate press release issued to South Korean media, Samsung blamed the unexpected decline in profit on inventory replacements and the negative impact of the United States’ expanded sanctions on the export of advanced artificial intelligence processors to China.
“The memory business saw a decline in performance due to one-off costs, such as provisions for inventory asset valuation,” the company said. “However, improved HBM products are currently being evaluated and shipped to customers.”
Samsung was referring to its High-Bandwidth Memory chips, which are a critical component of AI processors. The company has struggled to match the progress of its rival memory chipmaker SK Hynix Inc., which currently provides the vast majority of HBM chips to Nvidia Corp. for use in that company’s graphics processing units.
However, Samsung said it expects to see a sharp increase in HBM chip sales to Nvidia in the upcoming quarter, despite recent reports that its products have not yet passed the AI chip leader’s quality tests. It also said its non-memory chipmaking foundry is expected to reduce its losses in the third quarter due to improved utilization rates and a recovery in global chip demand.
Analysts said Samsung’s profits were also hit by a decline in NAND flash prices and a stronger Korean won, and its stock was down 1% in early morning trading in Korea.
Samsung has not yet disclosed detailed earnings regarding the performance of its individual business units, but analysts estimate that its semiconductor business will deliver an operating profit of around 1 trillion won, based on the company’s preliminary forecast.
The company is also unlikely to see much benefit from the launch of its new flagship smartphone, the AI-powered Galaxy S25, in January. Meanwhile, its television and home appliance businesses are also expected to see a drop in profitability, due partly to the impact of U.S. tariffs on imports.
Although the report was disappointing for investors, Hyundai Motor Securities Co. analyst Roh Geun-chang said the company’s profit is likely to rebound in the third quarter, driven by an expected increase in memory chip prices. “Samsung’s operating profit appears to have bottomed out in the second quarter and is expected to show gradual improvement,” the analyst told Yonhap.
Image: News/Dreamina
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