Samsung profit drops 56% on chip woes
Samsung Electronics has projected a 56% decline in its second-quarter operating profit, estimating earnings at 4.6 trillion won (approximately $3.37 billion). This marks the company's weakest performance in six quarters and falls significantly short of analyst expectations, which averaged around 6.2 trillion won. The downturn is primarily attributed to U.S. export restrictions on advanced AI chips to China and delays in supplying high-bandwidth memory (HBM) chips to key clients like Nvidia.
The semiconductor division, particularly the HBM segment, has faced challenges in securing Nvidia's certification for its HBM3E chips. While competitors such as SK Hynix and Micron have capitalized on the growing AI-driven demand, Samsung's gains have been subdued due to these certification delays and its significant exposure to the Chinese market, where sales have been impacted by U.S. restrictions. Additionally, Samsung's foundry business has reported losses due to low utilization rates and the broader impact of U.S. export controls.
Despite these setbacks, Samsung has initiated a 3.9 trillion won share buyback as part of a larger 10 trillion won program announced previously, aiming to bolster investor confidence. Looking ahead, the company anticipates a gradual recovery in the second half of the year, driven by improved HBM chip supply and a rebound in overall chip demand. Samsung is also focusing on expanding its HBM shipments to clients beyond Nvidia, including AMD and Broadcom, to mitigate the impact of current challenges. Detailed results, including a breakdown of earnings for each business segment, are expected to be released later in the month.
