Samsung's Semiconductor Struggles: Is This the Bottom for the Tech Giant?

The tech world is abuzz with Samsung Electronics' (SSNLF) Q2 2025 earnings report, which revealed a 15% drop in operating profit to 5.5 trillion won ($3.7 billion)—the lowest in six quarters. While this decline is no surprise, the root causes—particularly in its semiconductor division—are raising red flags about Samsung's ability to compete in the AI chip race. Let's dissect the risks, opportunities, and whether this could be a buying opportunity.

The Semiconductor Showdown: Why HBM3E Matters

Samsung's semiconductor division (DS Division) is in a life-or-death race to secure orders for its 12-layer HBM3E chips—the gold standard for AI servers. Here's the problem: NVIDIA hasn't certified them yet, and rival chipmakers like SK Hynix and Micron have already locked in deals. Without NVIDIA's buy-in, Samsung's AI chip sales remain flat, even as demand for data center hardware skyrockets.

This delay is critical because AI servers account for 30% of global HBM demand by 2025, per analysts. Samsung's failure to capture this market could permanently cede ground to competitors. Meanwhile, U.S. trade policies are compounding the pain: 33% of Samsung's HBM revenue comes from China, but new export rules are restricting sales of advanced chips there.

The China Problem—and the Tariff Trap

Samsung's reliance on China isn't just about HBM. The company's smartphone, TV, and display businesses all face rising logistics costs and U.S. tariffs. Proposed 25% tariffs on non-U.S.-made smartphones threaten to squeeze margins further. And let's not forget: Samsung's foundry division lost a major client (Google) to TSMC, a blow to its AI chip ambitions.

The takeaway? Samsung is getting hit from all sides: delayed certifications, trade wars, and a shrinking window to innovate.

Can Samsung Turn the Tide?

There are two potential saviors here:
1. 1c DRAM: Samsung plans to mass-produce its sixth-gen 10nm DRAM by end-2025. This could give it a leg up in HBM4 and DDR5 markets, which are critical for AI and high-performance computing.
2. Foundry Partnerships: Qualcomm is reportedly considering Samsung's 2nm process for future chips. If this materializes, it could stabilize Samsung's foundry losses and boost its AI chip credibility.

The July 9 launch of the Galaxy Z Fold7 and Z Flip7 also matters. These foldables, with AI-driven features, could revive smartphone sales and offset semiconductor weakness.

Valuation: Is This a Bottom or a Trap?

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

If the answers are yes, Samsung could rebound in H2. But if delays persist, its semiconductor division risks becoming a cash drain.

Investment Takeaway

This is a high-risk, high-reward call. Samsung's stock is down 20% from its 2024 high, and its dividend (KRW 365/share) remains solid. For aggressive investors, this could be a buy-the-dip opportunity if HBM3E and 1c DRAM deliver. But if Samsung's AI chip ambitions fizzle, the downside could be steep.

Final Verdict: Hold for now. Wait until Samsung reports HBM3E certification wins or signs major AI chip contracts. Until then, the risks outweigh the rewards—unless you're a long-term believer in Samsung's R&D muscle.

Action Items:
1. Track Samsung's HBM3E progress with NVIDIA.
2. Monitor Q3 results for 1c DRAM adoption and foundry revenue.
3. Watch for geopolitical developments—U.S.-China trade talks could be a wildcard.

Stay tuned—this is a race Samsung can't afford to lose.