“Samsung Electronics forecasts a 56% drop in Q2 2025 operating profit, hit by US restrictions on AI chip exports to China and delays in supplying high-bandwidth memory chips to Nvidia. The semiconductor giant struggles with inventory losses and increased competition, while its foundry business faces low utilization rates, impacting its market position.”
Samsung’s Profit Woes: Navigating US Chip Restrictions and Market Challenges
Sharp Profit Decline: Samsung Electronics projected a 56% year-on-year drop in second-quarter operating profit for 2025, estimating 4.59 trillion South Korean won ($3.4 billion), a significant miss from market expectations. The decline marks the company’s weakest performance in six quarters, driven by challenges in its semiconductor division.
US Export Controls Impact: The US has intensified restrictions on advanced AI chip exports to China, a key market for Samsung, which relies heavily on Chinese demand. These curbs led to a 500 billion won profit loss in the chip division, with inventory value adjustments exacerbating the financial strain.
HBM Chip Delays: Samsung’s delays in supplying high-bandwidth memory (HBM) chips, particularly the advanced HBM3E, to Nvidia have hurt its competitiveness. Rivals SK Hynix and Micron have capitalized on robust US demand for AI-driven memory chips, leaving Samsung trailing in the AI infrastructure boom.
Foundry Business Struggles: The company’s foundry division reported operating losses due to low utilization rates and US trade restrictions. Samsung noted that these challenges, combined with inventory write-downs, have hampered recovery efforts in its contract chipmaking operations.
China Market Dynamics: Samsung’s heavy reliance on China, where it operates facilities like its NAND flash memory plant in Xi’an, has been a double-edged sword. While competitors benefit from US AI growth, Samsung faces growing competition from Chinese firms like ChangXin Memory Technologies, backed by strong government support.
Future Outlook: Despite the Q2 setback, Samsung anticipates a gradual demand recovery in the second half of 2025, driven by rising memory chip prices and potential HBM3E certifications from Nvidia. The company also plans a 3.9 trillion won share buyback to boost investor confidence.
Broader Trade Implications: Recent US moves to lift restrictions on chip design software exports to China, following a trade truce, offer some relief. However, potential new curbs on US-made equipment for Samsung’s China fabs could pose further challenges, forcing reliance on European or Japanese alternatives.
Disclaimer: This article is based on recent news reports and publicly available information from sources like Reuters, The Hindu, and posts on X. Data is accurate as of July 8, 2025, and subject to change with new developments.
