Samsung Electronics Reports Q2 Operating Profit Down 56% on Semiconductor Business Challenges

Samsung Electronics reported a 56% drop in Q2 profit to 4.6 trillion won ($3.3 billion) due to struggles in its semiconductor business, which failed to meet demand for AI chips. Despite a 0.1% increase in revenue to 74 trillion won, the company's earnings fell short of expectations. The results highlight the challenges facing Samsung's semiconductor business, which is a key driver of its overall performance.

Samsung Electronics Co. reported a significant decline in its second-quarter operating profit, down 55.9% from a year earlier, to 4.59 trillion won ($3.4 billion). This sharp decrease was primarily attributed to sluggish performance in the chip business and the impact of US tariffs, according to the company's earnings guidance [1].

The company's operating profit for the quarter ending in June fell to 4.59 trillion won from 10.44 trillion won a year earlier. This represents a substantial drop, with the operating profit being 23.4% lower than market expectations [1]. Revenue, however, increased by 0.1% to 74 trillion won [1].

Samsung Electronics cited inventory replenishments and the US ban on exports of advanced AI chips to China as key factors contributing to the on-quarter decline in profit [1]. The company is expected to release its final earnings report later in the month.

The semiconductor division, a key driver of Samsung's performance, is facing significant challenges. The tech world is abuzz with Samsung's Q2 2025 earnings report, revealing a 15% drop in operating profit to 5.5 trillion won ($3.7 billion) [2]. The semiconductor division's struggles are raising concerns about Samsung's ability to compete in the AI chip race.

Samsung's semiconductor division is in a race to secure orders for its 12-layer HBM3E chips, which are crucial for AI servers. However, NVIDIA has not yet certified these chips, and rivals like SK Hynix and Micron have already secured deals [2]. This delay is critical because AI servers account for 30% of global HBM demand by 2025 [2].

The US trade policies are compounding the pain, with 33% of Samsung's HBM revenue coming from China. New export rules are restricting sales of advanced chips there [2]. Additionally, Samsung's smartphone, TV, and display businesses face rising logistics costs and proposed 25% tariffs on non-U.S.-made smartphones [2].

Samsung is also facing a loss of a major client, Google, to TSMC, which could further impact its AI chip ambitions [2]. Despite these challenges, Samsung plans to mass-produce its sixth-gen 10nm DRAM by end-2025, which could give it a leg up in HBM4 and DDR5 markets [2]. Foundry partnerships, such as those with Qualcomm, could also stabilize Samsung's foundry losses and boost its AI chip credibility [2].

Samsung's stock is up 19% year-to-date, but this is lagging the KOSPI's 27% rise. The market seems to be pricing in near-term pain but not long-term potential [2]. Key questions remain: Can Samsung secure NVIDIA's HBM3E orders by year-end? Will 1c DRAM and 2nm foundry wins offset trade-related headwinds?

Investors should closely monitor Samsung's progress with HBM3E certification with NVIDIA, the adoption of 1c DRAM in Q3 results, and geopolitical developments, such as U.S.-China trade talks [2].

References:
[1] https://www.koreaherald.com/article/10526477
[2] https://www.ainvest.com/news/samsung-semiconductor-struggles-bottom-tech-giant-2507/