Samsung Electronics Warns of Halved Profit Due to Tariffs and Export Restrictions.

Samsung Electronics expects a significant decline in profit, with operating profit forecast to be around 4.6 trillion Korean won, a 56% decrease from last year's 10.44 trillion won. The company is being impacted by US restrictions on the sale of AI chips to China and new tariffs from the White House. Samsung also announced a 3.9 trillion won stock buyback program to enhance shareholder value.

Title: Samsung Electronics Forecasts Significant Decline in Q2 Profit Amid US Trade Curbs and AI Chip Delays

Samsung Electronics (005930.KS) has projected a substantial 56% drop in its second-quarter operating profit, attributing the decline to weak AI chip sales and U.S. trade restrictions. The company's operating profit is expected to be around 4.6 trillion Korean won for the April-June period, down from 10.44 trillion won in the same period last year [1].

The primary causes of this significant decrease include U.S. restrictions on advanced AI chips for China and delays in supplying high-bandwidth memory (HBM) chips to key U.S. customer Nvidia. Samsung had previously indicated meaningful progress on its latest HBM 3E 12-layer chips could come as early as June but has not provided an update on the supply to Nvidia [1].

Key rivals such as SK Hynix (000660.KS) and Micron (MU) have benefited from robust demand for memory chips driven by AI growth in the United States. In contrast, Samsung relies more on the Chinese market, where sales of advanced chips are restricted by the U.S. and competition with local rivals is growing [1].

The company also expects its foundry business to report an operating loss, driven by sales restrictions and related inventory value adjustments stemming from U.S. export controls on advanced AI chips for China. However, it anticipates that the operating loss in its foundry business will narrow in the second half of the year as utilization improves in line with a gradual recovery in demand [1].

To enhance shareholder value, Samsung announced a 3.9 trillion won stock buyback program, part of a 10 trillion won buyback announced last November. This move is aimed at bolstering shareholder confidence despite the current challenges [1].

Analysts expect Samsung's profit to improve gradually, supported by the launch of new phones and growth in sales of HBM chips to non-Nvidia customers. However, the company continues to face business uncertainty from various U.S. trade policies, including potential tariffs on imported smartphones and the possibility of revoking authorizations granted to global chipmakers [3].

Samsung's shares slipped 0.2% against a 1.2% rise in the benchmark KOSPI as of 0341 GMT, reflecting investor concerns over the company's ability to revive its struggling semiconductor business. The company plans to release detailed results, including a breakdown of earnings for each of its businesses, on July 31 [1].

References:
[1] https://finance.yahoo.com/news/samsung-expects-56-drop-q2-225541119.html
[2] https://www.marketscreener.com/quote/stock/SAMSUNG-ELECTRONICS-CO-LT-6494906/news/Samsung-flags-big-miss-in-Q2-profit-blames-US-AI-chip-curbs-on-China-50451453/
[3] https://finance.yahoo.com/news/samsung-elec-q2-profit-likely-231647376.html
[4] https://www.marketscreener.com/quote/stock/SAMSUNG-ELECTRONICS-CO-LT-6494906/news/Samsung-Expects-Operating-Profit-to-Halve-Amid-U-S-Trade-Curbs-on-China-AI-Chip-Supply-Delays-U-50452122/