Samsung Braces for 39% Q2 Profit Fall Amid AI Chip Setbacks
Despite booming global demand for AI memory chips, Samsung struggles with certification delays, China restrictions, and intense competition from smaller rivals.
Weak AI Chip Sales Set to Dent Samsung’s Q2 Profit
Samsung Electronics is anticipated to report a 39% decline in its operating income for Q2 2025, largely due to continued setbacks in delivering advanced memory solutions to leading players in the AI chip industry. This expected decline comes despite a booming AI market that has otherwise driven strong performance for its industry competitors.
Between April and June, Samsung’s operating income is expected to shrink to 6.3 trillion won (roughly $4.62 billion), reflecting its lowest quarterly performance in the past 18 months, according to aggregated projections from LSEG SmartEstimate.
The dip in profitability highlights the challenges Samsung faces in aligning its memory chip production with the surging demand created by the rapid expansion of artificial intelligence technologies across data centers globally.
Rival Chipmakers Gain Edge in AI Market
Samsung’s difficulties come in stark contrast to the success seen by competitors, who have effectively capitalized on the AI boom. Firms like SK Hynix and Micron have reported increased sales and stronger financial results due to their more agile response to market needs, especially in supplying high-bandwidth memory (HBM) chips essential for AI processing.
In comparison, Samsung’s gains have been more muted. A significant portion of its market focus remains tied to China—a region currently facing strict U.S. Barriers placed on the transfer of next-generation semiconductor innovations. These regulatory constraints have made it more challenging for Samsung to ramp up AI-focused chip exports from China, curbing potential revenue growth.
HBM Certification Delays Hamper Growth
A key hurdle in Samsung’s AI strategy has been the sluggish progress in getting its latest high-bandwidth memory chip—specifically the HBM3E 12-high variant—approved by leading AI chip designers like Nvidia. Certification is crucial for integrating Samsung’s memory solutions into high-performance GPUs used in AI data centers.
While Samsung had earlier indicated it was aiming for meaningful developments on this front by mid-2025, there has been no official confirmation that the certification has been granted. This uncertainty continues to weigh on investor sentiment, as without Nvidia’s qualification, large-scale shipments are unlikely to materialize soon.
Nevertheless, a glimmer of progress has emerged—Samsung has initiated a modest rollout of its HBM3E chips to AMD, a key player in the artificial intelligence arena. Although this move could pave the way for broader adoption, it is not yet a significant revenue driver.
Smartphone Sales Offer a Ray of Hope
On a more positive note, Samsung’s smartphone segment is expected to show relatively stable performance during the second quarter. Analysts attribute this resilience to stockpiling activity by retailers ahead of potential U.S. tariffs on imported electronics, including smartphones.
The looming possibility of a 25% tariff on smartphones manufactured outside the U.S.—a proposal revived in recent trade policy debates—has prompted retailers to prepare for higher costs by boosting inventories. This demand cushion could help soften the blow from the struggling semiconductor business.
Geopolitical Tensions Cloud Broader Business Outlook
The broader environment for Samsung’s core business units—including memory chips, smartphones, and consumer appliances—remains uncertain due to ongoing trade policy risks.
The U.S. government is considering stricter controls on technology exports to China, including a potential rollback of previously granted permissions to global chipmakers operating in the country. If implemented, these changes could hinder Samsung’s access to essential U.S. technology for its Chinese manufacturing operations.
Such geopolitical headwinds continue to pose strategic risks for Samsung, which relies heavily on both Chinese manufacturing and global supply chains. This uncertainty adds a further layer of complexity to its long-term growth ambitions in the highly competitive and politically sensitive semiconductor sector.
Share Price Trails Behind Sector Peers
Despite gaining approximately 19% since the beginning of the year, Samsung’s stock performance has lagged behind that of its memory chip rivals and the broader KOSPI index, which has advanced more than 27% during the same period.
The underwhelming stock growth reflects ongoing investor concerns about Samsung’s position in the rapidly evolving AI chip race, especially as smaller competitors appear more nimble and better aligned with current market trends.
Unless Samsung can accelerate its HBM chip development and secure vital certifications, it risks falling further behind in a sector that is increasingly pivotal to the future of global computing infrastructure.
Final Thoughts
Samsung Electronics is facing a challenging second quarter, with operating profit expected to decline nearly 40% due to slow progress in meeting the surging demand for AI-optimized memory chips. While competitors ride the wave of AI innovation, Samsung finds itself entangled in supply delays, U.S.-China trade tensions, and certification roadblocks that hamper its ability to capitalize on the boom.
The tech giant’s smartphone sales and modest stock gains offer some relief, but the company’s future growth will heavily depend on how swiftly it can resolve certification issues, diversify its export markets, and adapt to a shifting global regulatory landscape. With the battle for dominance in AI chips intensifying, all eyes are turning to Samsung’s next strategic steps, as both investors and industry experts await its moves.
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The image added is for representation purposes only
