Samsung’s Q2 profit drops amid rising challenges in AI chip sector
Samsung just posted a harsh profit warning, a 56% drop in second-quarter operating profit and it’s raising red flags for its already shaky chip business. The company says U.S. restrictions on selling advanced AI chips to China are to blame, but that’s not the whole story.
Slowing Momentum in AI Chips
Samsung is still struggling to catch up with rivals like SK Hynix and Micron when it comes to AI-related memory chips, especially high-bandwidth memory (HBM) used by companies like Nvidia. Back in March, Samsung hinted it was making “meaningful progress” with its 12-layer HBM 3E chips and expected movement by June. But now, no updates on shipments to Nvidia have been shared, only vague comments about ongoing customer evaluations.
That silence has fueled speculation that Samsung’s plans are off-track, especially with Nvidia reportedly not yet receiving HBM orders. This delay may have directly led to Samsung’s write-down of inventory value this quarter.
China Dependency and U.S. Export Curbs
Samsung’s exposure to China is now working against it. With U.S. export controls limiting AI chip sales to Chinese companies, Samsung’s reliance on that market is causing deeper losses compared to competitors focused more on the U.S. and Europe. SK Hynix, for instance, has been aggressively pushing its HBM chips to U.S. clients, gaining more momentum in the AI boom.
Ryu Young-ho, senior analyst at NH Investment & Securities Said,
“For Samsung Electronics, the key issue remains regaining competitiveness … Everything ultimately comes back to HBM,”
His point hits home that AI isn’t just hype anymore, it’s driving real demand, and Samsung is lagging in the one category that matters most right now.
Profit Breakdown and Share Buyback
Samsung estimates Q2 operating profit at 4.6 trillion won, sharply below analyst expectations of 6.2 trillion. That’s the company’s weakest performance in six quarters. Revenue is projected to dip slightly to 74 trillion won.
Digging deeper, analysts believe the semiconductor division might have earned just 500 billion won in profit down over 90% from a year ago. While Samsung’s mobile division likely performed better, the chip side continues to drag. The foundry unit also struggled with weak utilization rates and supply chain friction.
To calm nerves, Samsung announced a 3.9 trillion won share buyback part of its 10 trillion won program. But the stock still slipped 0.2% during early trading, while the broader KOSPI rose 1.2%.
Tough Road Ahead
The bigger issue here is future competitiveness. Samsung needs to ramp up HBM chip shipments fast not just for Nvidia, but for other AI-focused clients as well. U.S. export controls, potential tariffs, and fierce pricing competition will make it harder to maintain margins.
Analysts also don’t expect Samsung to raise chip prices anytime soon, which will keep profit recovery slow. For now, there’s hope that new smartphone launches and expansion into non-Nvidia HBM markets will support a gradual rebound.
This quarter is a wake-up call for Samsung. AI demand is growing fast, but Samsung’s supply isn’t keeping up. Without rapid movement in high-end memory chips and stronger diversification beyond China, the company risks losing more ground to faster-moving rivals.
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