Samsung Electronics Co yesterday said that it expected its second-quarter operating profit to fall by more than half, blaming US export controls on advanced artificial intelligence (AI) chips to China.
Samsung said in a regulatory filing that its April-June operating profit was expected to drop to 4.6 trillion won (US$3.3 billion), down 56 percent from a year earlier and 31 percent from the previous quarter.
The figure was 23.4 percent lower than the average estimate, according to South Korea’s Yonhap news agency, which cited its own financial data firm.
Photo: AFP
Sales were estimated at 74 trillion won, down 0.1 percent from a year earlier and 6.5 percent from the previous quarter, the company said.
Samsung 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.
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 utilization improves due to a gradual recovery in demand.”
TrendForce Corp (集邦科技) analyst Tom Hsu (許家源) attributed the sharp profit and revenue drop “primarily to the weak foundry business, while the performance of the memory business stayed relatively stable.” 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 centers, Hsu added.
Performance from the company’s high-bandwidth memory (HBM) chips — used for advanced AI computing — “likely fell short of expectations,” Korea Investment and Securities Co analyst Chae Min-sook said.
In addition, a price drop for its NAND — used for data storage — “likely widened losses slightly,” Chae said.
“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 has threatened South Korea with 25 percent tariffs in a letter to Seoul on Monday.
Trump has repeatedly demanded that global companies — including Samsung and rival Apple Inc — relocate production to the US, 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 yesterday said it was maintaining “close communication” with the Trump administration, as it sought to head off additional measures.
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