Samsung Expects Q2 Operating Profit to Halve Amid US Trade Curbs and AI Chip Delays

Samsung Electronics expects Q2 operating profit to halve to 4.6 trillion won, missing consensus estimates, due to US trade curbs on China and delayed sales of advanced AI chips to Nvidia. The company attributed its downbeat earnings guidance to one-off provisional costs and inventory value losses. Quarterly revenue is likely flat at 74 trillion won.

Samsung Electronics has projected a significant decline in its second-quarter operating profit, halving it to 4.6 trillion won, which is a 55.9% drop from the previous year. This performance falls short of analysts' expectations, with the company attributing the miss to U.S. trade curbs on China and delayed sales of advanced AI chips to Nvidia [1][2].

The company's Device Solutions (DS) division, which houses its chip business, was particularly affected. Samsung reported that the DS Division experienced a quarter-on-quarter decline in profit due to inventory value adjustments and the impact of U.S. restrictions on advanced AI chips for China [1][2]. The memory business faced one-off costs such as inventory value adjustments, though the company noted that its improved high-bandwidth memory (HBM) products were undergoing customer evaluation and proceeding with shipments [1][2].

Samsung's artificial intelligence chips business also faced challenges. Delays in supplying its latest products to Nvidia and continued losses in its contract chip manufacturing business contributed to the overall profit decline [1][2]. The company had previously indicated that it expected meaningful progress on its latest HBM 3E 12-layer chips by June, but no update was provided on the supply to Nvidia [2].

The quarterly revenue is expected to remain flat at 74 trillion won, a 0.1% decrease from the previous year. The company plans to release detailed results, including a breakdown of earnings for each of its businesses, on July 31 [1][2].

The market reaction was mixed, with Samsung Electronics shares rising 0.4% despite the disappointing earnings guidance. The company also announced a share buyback of 3.9 trillion won ($2.85 billion) as part of a 10 trillion won buyback program announced last November [2].

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 potential impact of U.S. tariffs on the company's mainstay chip and phone businesses remains a concern, which could pressure margins [2].

References:
[1] https://www.marketscreener.com/quote/stock/SAMSUNG-ELECTRONICS-CO-LT-6494906/news/Samsung-flags-big-miss-in-Q2-profit-citing-US-AI-curbs-on-China-50451453/
[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://www.koreaherald.com/article/10526477