Delays in HBM supply to Nvidia and China restrictions weigh heavily
Samsung Electronics forecast a 56% plunge in second-quarter operating profit, missing analyst expectations and raising new concerns about the firm’s semiconductor strategy. The projected profit of 4.6 trillion won ($3.36 billion) marks its weakest quarterly result in 18 months, down from 10.4 trillion won a year ago and 6.7 trillion won in Q1 2025.
The world’s largest memory chipmaker cited U.S. restrictions on advanced AI chip exports to China and inventory valuation losses as primary reasons. However, analysts point to Samsung’s slow progress in delivering high-bandwidth memory (HBM) chips to major client Nvidia as another critical issue.
HBM bottlenecks deepen pressure on chip unit
In March, Samsung had promised “meaningful progress” on its HBM 3E 12-layer chips by June, but offered no update this week. It simply said the chips are still under customer evaluation and in shipment stages. In contrast, rivals SK Hynix and Micron have been faster to benefit from soaring AI-driven chip demand in the U.S.
Analysts estimate the chip division’s operating profit may have collapsed over 90% year-on-year to just 500 billion won, driven in part by unsold HBM inventory. Samsung also acknowledged valuation adjustments on its chip inventory but provided no specifics. The firm’s reliance on China — a market hampered by U.S. export controls — has further eroded its competitiveness.
Other divisions show resilience as outlook dims
Samsung’s phone business is expected to have performed better this quarter, aided by frontloaded demand ahead of possible U.S. tariffs on imported smartphones. Still, overall revenue is expected to fall 0.1% year-on-year to 74 trillion won, highlighting stagnant top-line growth.
The company also reported further weakness in its foundry unit, citing low utilisation and impacts from export controls. It expects that division’s losses to narrow in the second half of the year as demand slowly recovers.
Shareholder buybacks continue despite weak earnings
Samsung announced plans to repurchase 3.9 trillion won ($2.85 billion) in stock as part of a 10 trillion won buyback program launched last year. As of early Tuesday trading, shares were down 0.2% against a 1.2% rise in South Korea’s KOSPI index.
The company will release detailed financial results and business segment breakdowns on July 31. Analysts anticipate gradual recovery, driven by new smartphone launches and increased HBM shipments to clients beyond Nvidia.
