Samsung’s AI Chip Woes Trigger Profit Slump

• Samsung’s Q2 profit plunged 56%, citing U.S. AI chip curbs on China and delays in HBM shipments to Nvidia, raising investor concerns.

Sharp Decline in Semiconductor Earnings

Samsung Electronics has projected a staggering 56% drop in second-quarter operating profit, marking its weakest performance in six quarters. The company attributed the shortfall primarily to U.S. export restrictions on advanced AI chips destined for China. Analysts, however, pointed to additional factors, including delays in delivering high-bandwidth memory (HBM) chips to Nvidia, a key U.S. customer. Despite earlier promises of progress on its HBM 3E 12-layer chips, Samsung offered no update on shipments, stating only that products were under evaluation.

Inventory Writedowns and Competitive Pressure

The chip division’s operating profit is estimated to have plummeted over 90% year-on-year, landing near 500 billion won. Samsung cited inventory value adjustments as a contributing factor, likely linked to unsold HBM stock. Meanwhile, rivals SK Hynix and Micron have capitalized on robust AI-driven demand in the U.S., leaving Samsung exposed due to its heavier reliance on the Chinese market. Potential U.S. tariffs and fierce competition further complicate efforts to maintain margins, especially in its core chip and smartphone segments.

Outlook and Recovery Strategy

Samsung’s revenue for the quarter is expected to dip slightly to 74 trillion won, while its foundry business also suffered from low utilization and export controls. To reassure investors, the company announced a 3.9 trillion won share buyback, part of a larger 10 trillion won plan. Analysts remain cautiously optimistic, anticipating gradual recovery through new phone launches and expanded HBM sales to non-Nvidia clients. Detailed earnings breakdowns are scheduled for release on July 31.