Samsung Electronics said Tuesday it expected its second-quarter operating profits to fall by more than half, blaming US export controls on advanced AI chips to China.
The firm is the flagship subsidiary of South Korean giant Samsung Group, by far the largest of the family-controlled conglomerates that dominate business in Asia’s fourth-largest economy.
The tech giant said in a regulatory filing that its April-June operating profits were expected to drop to 4.6 trillion won ($3.3 billion) — down 56 per cent from a year earlier and 31 per cent from the previous quarter.
The figure was 23.4 per cent lower than the average estimate, according to South Korea’s Yonhap news agency, which cited its financial data firm.
Sales were estimated at 74 trillion won, down 0.1 per cent from a year earlier and 6.5 per cent from the previous quarter.
The company did not disclose its net income or the detailed earnings of its business divisions.
In a separate release, the company explained why the results “fell short of market expectations”.
The company’s key semiconductors division “recorded a quarter-on-quarter decline in profit due to inventory value adjustments and the impact of US restrictions on advanced AI chips for China”, it said.
Washington has expanded efforts to prevent Beijing from getting state-of-the-art chips over concerns that they could be used to advance the country’s military systems and other tech capabilities.
The restrictions mean the company’s high-tech factories were running well below capacity.
However, Samsung projected that in the second half of the year it would trim operating losses “as utilisation improves due to a gradual recovery in demand”.
Shares in Samsung were down around 0.8 per cent in Seoul on Tuesday.
– ‘Weak foundry’-
The sharp profit and revenue drop is attributed “primarily to the weak foundry business, while the performance of the memory business stayed relatively stable”, Tom Hsu, an analyst at TrendForce told AFP.
The outlook for the next quarter is more optimistic, with “memory chip prices and shipments to keep rising, thanks to strong demand”, especially from data centres, added Hsu, including for AI.
Performance from the company’s HBM chips — used for advanced AI computing — “likely fell short of expectations”, said Chae Min-sook, an analyst at Korea Investment and Securities.
In addition, a price drop for its NAND — used for data storage — “likely widened losses slightly”, Chae added.
“The sharp decline in the won-dollar exchange rate since June will likely weigh on both sales and operating profit (for the second quarter),” she added.
Samsung is among the smartphone makers under pressure from US President Donald Trump, who threatened South Korea with 25 per cent tariffs in a letter to Seoul on Monday.
Trump has repeatedly demanded that global companies — including Samsung and rival Apple — relocate production to the United States, which many experts warn is unrealistic, citing complex Asia-based supply chains.
South Korea has already been hit by levies on steel and car exports, and said Tuesday it was maintaining “close communication” with the Trump administration as it sought to head off additional measures.
AFP
