By Kwanwoo Jun


Samsung Electronics expects its second-quarter operating profit to more than halve from a year earlier, a much sharper drop than market consensus, hurt by U.S. trade curbs on China and delayed sales of advanced artificial-intelligence chips to Nvidia.

The South Korean technology giant attributed its downbeat earnings guidance partly to its one-off recognition of inventory value losses stemming from U.S. export controls limiting sales of advanced chips to key-market China. Analysts said some of the weakness was due to a delay in supplying advanced high-bandwidth-memory products to Nvidia, which weighed on the company's DRAM segment.

Samsung has been struggling to catch up with smaller chip-making rivals SK Hynix and Micron Technology that have benefited from brisk shipments of higher-end AI chips.

The company said Tuesday that customer evaluation and shipments of its advanced memory chips are proceeding, while operating losses in its nonmemory business, which includes its contract chip-making and logic chip-designing segments, are expected to narrow in the second half of the year due to a gradual recovery in demand.

In April, the company said sales of its HBM products could recover from the second quarter. Samsung has yet to confirm shipments of new 12-layer HBM3E products to Nvidia, although it began supplying the chips to Advanced Micro Devices in June.

Samsung's annual shipments of HBM products will inevitably be reduced in 2025 given the sluggish qualification process, SK Securities analyst Han Dong-hee said.

Still, the analyst expects the company to benefit from its eventual entry into the advanced HBM market, persistent demand for AI chips and tight supply-demand conditions for conventional memory chips in the second half. "This is a phase where performance hits its lowest point," Han said.

Samsung on Tuesday projected a 56% plunge in April-June operating profit to 4.600 trillion won, equivalent to $3.34 billion, its first profit decline since the fourth quarter of 2023. That missed the 6.359 trillion won consensus forecast of analysts in a FactSet poll.

Quarterly revenue was likely flat at 74.000 trillion won, it said in a preliminary earnings report.

Its shares fell 0.5% to close at 61,400 won after the guidance update, reversing early gains partly fueled by the company's 3.510 trillion won buyback plan. The stock has risen about 15% year to date, trailing gains by most other major memory-chip makers and underperforming the benchmark Kospi's nearly 30% increase.

Global chip makers, including Samsung, have been under pressure from U.S. restrictions on the export of advanced chips and chip-making equipment to China.

Uncertainty over protectionist U.S. trade policies has added to concerns about Samsung's smartphone business, which was strong enough in the first quarter to offset weakness in its semiconductor segment.

President Trump has threatened to impose a new levy on smartphones shipped to the U.S., in addition to higher duties on auto, steel and aluminum imports. On Monday, he said South Korea and other trading partners will face separate "reciprocal tariffs" if they fail to reach trade deals before the new Aug. 1 deadline.

Samsung plans to unveil new Galaxy foldable phones on Wednesday as it continues to enhance its AI-enabled devices to boost sales. It also agreed to acquire Xealth, a U.S.-based healthcare platform, to expand its mobile healthcare-services business.


Write to Kwanwoo Jun at kwanwoo.jun@wsj.com


(END) Dow Jones Newswires

07-08-25 0423ET