Samsung flags 56% profit drop in Q2 as AI chip woes and US export curbs hit semiconductor business

Samsung Electronics has projected a sharp 56% decline in its second-quarter operating profit, citing weak AI chip sales and intensifying US restrictions on advanced chip exports to China. The profit warning has sparked renewed concerns over the South Korean tech giant’s ability to turn around its struggling semiconductor division.

In a preliminary earnings report on Tuesday, Samsung estimated operating profit for the April–June period at 4.6 trillion won (approximately $3.36 billion), missing analyst expectations by a wide margin. That figure marks the company’s lowest quarterly profit in six quarters, down from 10.4 trillion won a year ago and 6.7 trillion won in the previous quarter.

The world’s largest memory chipmaker said the downturn was largely due to the impact of US export controls and inventory-related losses within its Device Solutions (DS) division. “The DS Division recorded a quarter-on-quarter decline in profit due to inventory value adjustments and the impact of US restrictions on advanced AI chips for China,” Samsung said in a statement.

While rival chipmakers SK Hynix and Micron have enjoyed a surge in demand driven by AI adoption in the US, Samsung’s heavier reliance on China has become a liability amid tightening export controls. Analysts also pointed to delays in the shipment of high-bandwidth memory (HBM) chips to key partner Nvidia as a factor in the earnings slump.

In March, Samsung indicated that meaningful progress on its latest 12-layer HBM 3E chips was expected by June. However, the company offered no new timeline for supplying Nvidia, only noting that the chips were still under customer evaluation.

Samsung’s foundry business was similarly hit, with the company blaming lower utilisation and inventory adjustments triggered by US trade restrictions. It anticipates a narrower operating loss for its foundry division in the second half of the year as demand begins to recover.

Despite the weak outlook, Samsung shares rose 0.4% in early trading on the KOSPI, lagging behind the benchmark index’s 1.5% gain. The company also announced plans to proceed with a share buyback worth 3.9 trillion won, part of a 10 trillion won programme launched last November.

Revenue for the quarter is expected to dip slightly by 0.1% to 74 trillion won compared to the same period last year.

Samsung said detailed financial results, including a breakdown across its business units, will be released on July 31.