Samsung Forecasts 56% Profit Drop Amid US Chip Export Restrictions

Samsung Electronics has warned of a sharp fall in its second-quarter operating profits, attributing the decline mainly to US export controls on advanced AI chips destined for China. The South Korean tech giant expects its operating profit for April to June to drop to 4.6 trillion won (approximately $3.3 billion), down 56% year-on-year and 31% lower than the previous quarter.

According to a filing, the company’s estimated revenue stands at 74 trillion won, showing a marginal 0.1% decline from the same period last year and a 6.5% dip from the previous quarter. The disappointing results are largely due to a weak performance in the foundry business and underwhelming demand for high-bandwidth memory (HBM) chips used in AI applications.

Samsung explained the lower profits were caused by U.S. restrictions on exporting advanced chips to China, which led to reduced factory utilization and inventory valuation losses. These curbs are part of Washington’s broader efforts to prevent cutting-edge technology from strengthening China’s military and strategic capabilities.

Despite these challenges, Samsung expects a recovery in the second half of 2025, anticipating a boost in demand for memory chips, especially from data centers and AI applications. Analysts believe improving utilization and rising chip prices could support the company’s outlook moving forward.

Additionally, the South Korean won’s sharp depreciation against the dollar since June has also impacted Samsung’s earnings. Meanwhile, rising political tensions have added to the uncertainty, with US President Donald Trump threatening tariffs on South Korean exports and urging companies like Samsung to move production to the US, a shift many experts say is impractical due to global supply chain complexities.

Source: The Economic Times