Samsung's Chip Business Sees 94% Profit Drop Amid US Export Controls

Samsung Electronics' chip business operating profit fell 94% in Q2 YoY due to US export controls on AI chip shipments to China. The company's device solutions department, which produces chips for servers and smartphones, reported an operating profit of 400 billion won ($288 million), down from 6.5 trillion won in the same period last year.

Title: Samsung Electronics' Chip Business Faces Challenges in Q2 2025

Samsung Electronics' chip business faced significant challenges in the second quarter of 2025, with its operating profit plummeting by 94% year-over-year (YoY). The company reported an operating profit of 400 billion won ($288 million) for its device solutions department, down from 6.5 trillion won ($4.6 billion) in the same period last year [1].

The decline was primarily attributed to shipment delays and U.S. export restrictions on advanced semiconductor sales to China, which impacted the division's profit. Additionally, inventory value adjustments to memory chips and one-off costs from U.S. export restrictions further contributed to the operating loss [1].

Despite these challenges, Samsung expects a gradual recovery in the second half of 2025, driven by robust artificial intelligence (AI) demand backed by continued investments from major cloud service providers [1]. The company also anticipates that the market environment will improve, supported by AI-driven demand and investments in data centers by major tech companies such as Meta Platforms and Microsoft [1].

Samsung's chip division posted a profit of 400 billion won during the quarter, marking the first time in six quarters that the figure has dropped below the 1 trillion won mark. The division's revenue rose by 0.7% to 74.6 trillion won ($54.4 billion), in line with its earlier estimate [1].

S&P Global Ratings has affirmed Samsung Electronics' 'AA-/A-1+' ratings with a stable outlook, projecting gradual profitability improvement over the next one to two years. The ratings agency expects Samsung's profitability to recover in the second half of 2025, primarily driven by improvements in the device solutions (DS) division [2]. S&P believes that recent advancements in High Bandwidth Memory (HBM) technology should enhance Samsung's product competitiveness and attract customers facing limited supplier options.

Samsung's operating performance has weakened recently, with operating profit of KRW 11.3 trillion in the first half of 2025, down from KRW 17 trillion in the same period of 2024. The company has struggled to capitalize on the HBM market since the AI boom began in mid-2023, falling behind competitors [2].

However, S&P believes that Samsung has strengthened its competitiveness through HBM4 versus HBM3E. Large end-customers facing limited supplier options and higher prices may diversify their HBM suppliers, giving Samsung an opportunity to expand its higher-margin HBM sales in coming quarters [2].

For conventional dynamic random-access memory (DRAM), average selling prices are expected to remain strong due to tight supply. The company’s memory chip profitability could increase as the proportion of HBM within memory rises [2].

Samsung is expected to maintain its solid net cash position despite sizable annual capital expenditure of KRW 56-58 trillion over the next two years. The company announced a KRW 10 trillion share buyback plan in November 2024, with a large portion to be executed in 2025 [2].

References:
[1] Reuters. (2025, July 30). Samsung predicts gradual second-half recovery after Q2 chip profits plunge 94%. Retrieved from https://www.reuters.com/world/china/samsung-predicts-gradual-second-half-recovery-after-q2-chip-profits-plunge-94-2025-07-30/
[2] Investing.com. (2025, July 31). Samsung Electronics' AAA-1 ratings affirmed by S&P Global Ratings. Retrieved from https://www.investing.com/news/stock-market-news/samsung-electronics-aaa1-ratings-affirmed-by-sp-global-93CH-4160687