Samsung Expects Q2 Operating Profit to Halve Amid U.S. Trade Restrictions and Delayed AI Chip Sales

Key Takeaways:

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1. Profit Decline: Samsung forecasts a 56% year-over-year drop in Q2 operating profit to 4.6 trillion won $3.34 billion), missing analysts’ expectations of 6.359 trillion won.
2. Trade Restrictions Impact: U.S. export controls on advanced chips to China led to inventory value losses, contributing to the sharp profit decline.
3. Delayed AI Chip Sales: Samsung’s delayed supply of high-bandwidth memory (HBM) chips to Nvidia has hurt its DRAM segment, allowing rivals like SK Hynix and Micron to gain ground.
4. Revenue Flat: Quarterly revenue is expected to remain flat at 74 trillion won, with weakness in semiconductors offset by strength in smartphones.
5. Future Outlook: Samsung expects operating losses in its nonmemory business to narrow in the second half of 2025, driven by a gradual recovery in demand for advanced memory chips.

What Happened?

Samsung Electronics reported a 56% drop in Q2 operating profit, citing the impact of U.S. trade restrictions on advanced chip exports to China and delays in supplying HBM3E memory chips to Nvidia. The company also incurred one-off costs related to inventory value losses.

While Samsung’s smartphone business performed well in Q1, uncertainty over U.S. protectionist trade policies and potential tariffs on smartphones and other goods has added to the company’s challenges.

Why It Matters?

Samsung’s struggles highlight the growing impact of geopolitical tensions on the global semiconductor industry. U.S. export controls have disrupted supply chains, forcing companies like Samsung to navigate regulatory hurdles while competing with rivals that are better positioned to meet demand for AI chips.

The delayed rollout of advanced memory products underscores Samsung’s challenges in catching up with competitors like SK Hynix, which has capitalized on the surge in demand for AI-driven technologies.

What’s Next?

Samsung expects a gradual recovery in its semiconductor business in the second half of 2025, with shipments of advanced memory chips to Nvidia and AMD likely to pick up. However, the company faces continued pressure from U.S. trade policies and potential tariffs on smartphones.

Investors will closely watch Samsung’s full Q2 earnings report later this month for further details on its recovery plans and the impact of geopolitical risks on its business.